Low unemployment, GDP growth and rising wages. America’s economy is booming. But there is one troubling area of the economy
that could become a big problem America’s rising national debt. “We have a huge debt and deficit problem
in the United States and we have to figure that out.” America currently owes to its creditors about
$22 trillion, a figure that is expected to rise to $27 trillion over the next four years. That would be a 38% increase since President
Trump took office in 2017, a problem he has previously acknowledged. “We are sitting on a timebomb.” But the more important statistic to look at
is a country’s debt-to-GDP ratio. America’s federal debt is currently 78%
of its GDP. And it’s estimated to rise to 96% by 2028. That would be the highest percentage since
the end of World War Two. Many other countries around the world have
huge amounts of debt, but according to the International Monetary Fund, the U.S. is the
only advanced economy where debt relative to GDP is likely to increase. So how did we get here? Basically, the government has spent more money
then it has taken in. The government mainly raises money from taxes
and then uses that money to fund social security, healthcare and defense. But the government does not have enough money
to pay for these programs and borrows money instead. But how big of a problem is it? Well, it depends. Economists generally agree that increasing
the federal debt is often needed when the economy needs a boost, such as when the financial
crisis hit in 2007. The problem is that because of the huge tax
cuts made by the Trump administration in 2017, this debt is increasing even though the economy
is strong. In the first full year of Trump’s presidency,
the federal deficit rose to its highest level in six years. And it’s projected to get higher and higher. It led to this rather scary statement from
the Committee for a Responsible Federal Budget. “Rarely have deficits risen when the economy
is booming. And never in modern U.S. history have deficits
been so high outside of a war or recession or their aftermath.” Rising interest rates also mean that American
interest payments on this debt alone are getting larger and larger. There is now a fear that we could soon have
a debt crisis on our hands, where America is so deep in debt when the next financial
crisis hits, it won’t be able to spend its way out of it. So how could this be solved? Many would argue to increase taxes and/or
cut government spending. Under President Trump, an increase in taxes
seems unlikely. In fact, huge tax cuts were made by his administration
in 2017. There also seems little incentive on Capitol
Hill to bring down the debt. This is a huge contrast from five years ago,
when Republicans used it as one of their main lines of attack on the Obama administration. “We know where this path leads – straight
into a debt crisis. “This president has proven he will do almost
anything to protect the size and the scope of Washington DC’s burgeoning bureaucracy,
including threatening the economic security of every American by backing us up to the
edge of default.” But there are few Republican voices calling
for spending to be restricted now. It might not be a crisis yet – but with debt
increasing, interest rates rising and an aging population leading to more people than ever
before relying on retirement benefits, the national debt ‘timebomb’ as described
by President Trump could one day explode.