Raising National Debt

Francesca Pavillard-Cain
COTH 202
Essay 1
11-5-12
Surplus to Deficit: the Effects of the Bush’s Tax Cut
According to NASA, Forbes, and Yahoo Finance, with 16 trillion dollars one could buy 9,400 space shuttles, 8,600 Yankee Franchises, 25 Apple corporations, or all of Europe. These examples help put the 16 trillion dollar U.S. debt in perspective. Due to the nature of ourglobalized economy, the U.S. national debt not only affects all American citizens but also affects people worldwide. The policy that caused today’s national debt was the Bush administration tax cuts. The unsupportable debt is only exacerbated by the divided view in the political parties making it almost impossible to solve the debt crisis.
National debt is not just affecting the U.S. governmentbut impacts everyday Americans as well. An example of how national debt affects everyday Americans is health care. Kimberly Amadmeo, the president of World Money, explains that, “social security trust funds took in more revenue through payroll taxes leveraged on baby boomers than it needed. This should have been invested so that it would be available for retired boomers but it wasn’t. Instead itwas loaned to the government to finance increased deficit spending” (Amadeo 1). In twenty years the social security trust fund will not have enough money to cover retirement benefits that was promised to baby boomers. In order to finance retirement benefits it would mean higher taxes. Even with high taxes it is likely that benefits will be curtailed to retirees younger than seventy or people withhigher income who do not depend on social security as their sole source of money. This puts things into perspective of how much the national debt affects all Americans. Most Americans have family that depends on or uses social security; regardless an increase in taxes affects all U.S. taxpayers. Beyond the example of social security all government-funded programs face the risk of decreased spendingor increased taxes to fund them. This includes programs that affect all varieties of Americans like: military, education, transportation, healthcare, Medicare, unemployment programs, foster care, and more. If our nation continues to spend in the same way we will have to cut spending to these programs and raise taxes.
Kimberly Amadeo, president of world money defines the U.S. national debt as“the sum of all outstanding debt owed by the Federal Government and is now greater than 16 trillion dollars. Nearly two-thirds is the public debt, which is owed to the people, businesses and foreign governments who bought Treasury bills, notes and bonds.” (Amadeo 1). Two thirds of the U.S. debt is financed by foreign governments, showing the United State’s dependency on other countries to sustainnational spending. As stated by Randall Wray, a professor of economics at the University of Missouri, in his article, “Minsky’s Money Manager Capitalism and the Global Financial Crisis,” “from 1988 to 2011 holding of US treasury bonds from foreign countries went up from 13% to 31% (Wray 35)”. The reason that foreign countries are increasing their holding of treasuries is so that they can keep theircurrencies low relative to the US dollar. This means that these foreign countries have a huge affect on the U.S. and there is little to nothing we can do about it unless we start to pay off our debt. As these countries borrow money they typically invest it into their own countries, which, could possibly result in a decrease in demand for U.S. treasury and will increase the interest rate.Demonstrating how influential foreign countries can be, Paul L. Posner of George Mason University explains another possible consequence of increased treasury from foreign countries saying, “We’re like no other country. Foreign investors are reluctant to demand high interest rates from Washington for fear that if the government defaulted on its loans, the dollar would fall, And if that happened,...