Question

Why is it difficult for Congress to address the National Debt?

Answer 1

Introduction

The National Debt is the borrowing which the Government of the United States has had to take because their expenses have exceeded their income over the years.

However, due to the Corona Virus Pandemic, the expected National Debt is going to rise even further, as the government has provided relief to numerous industries across the globe. The resultant is that revenues have shrunk even further on one hand due to tax reliefs and business shut downs, and on the other expenses towards health care have increased. It is expected that the Fiscal Deficit or the National Debt in the country would rise to about 18 Trillion Dollars by end of financial year 2020.

The core reasons why it is difficult now for the Congress to address the national debt is as follows: -

Case Specifics: -

As a macroeconomic policy tool, there are 2 primary ways in which National Debt may be managed. One of them is through increasing the government revenue through increased taxation, and the other is through reduced spending to ensure that money can be saved and given over in the form of loan repayments.

Both these scenarios seem highly unlikely as the economy is going through great recession which is never seen in economic history of the United States. As the government relaxes tax and increases spending to ensure demand remains certain and the cyclical pressure of depression in the economy continues it is extremely difficult to take counteractive policies this is because increasing taxes or reducing spending at this moment and time would lead to an ever-widening depression crisis.

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