Question

Is the US national debt cause for concern? I need some of the negative implications that come from the increasing national debt. Please explain.

Answer 1

The public holds about two-thirds of debt.1 The government owes this to U.S. buyers. Treasury bills, notes, and bonds, including personal, corporate, and foreign governments.

The third remaining is intra-Government debt. The Treasury owes this debt to its various departments that hold securities in government account, such as Social Security, which is one of the largest owners. These government account securities have been running surpluses for years and those surpluses are used by the federal government to pay for other departments.

Sustained large federal deficits cause lower investment and higher interest rates. With government borrowing more, a higher percentage of the investment-available savings would go to government securities. In turn, this would reduce the amount invested in private undertakings such as factories and computers, making the workforce less productive

As interest rates from historically low levels return to more typical levels, and the debt rises, federal interest payments will rise rapidly. As interest is taking up more of the budget, we're going to have less to spend on programmes. If the government wants to maintain the same level of benefits and services without running big deficits, it will require more revenue.