Question

Get data on government debt of any country of your choice and explain its fluctuations. Also, explain who bears the burden of government debt and why. Under what circumstances is there no burden to be borne of government debt?

Country: United States

Answer 1

• Data on government debt of United states and its fluctuations

The us , from its beginning in 1790 to the current, has been freed from a government debt for only two years, 1834 and 1835.1 The national debt has grown from $75.5 million in 1790 to $3.3 trillion in 2001. The history of the U.S. government debt as a percent of gross domestic product (GDP) since 1940 The government debt reached a high of 108.6% of GDP in 1946. It than began a long decline, reaching a low of 32.5% in 1981. The country's budget deficits of the 1980s and 1990s reversed this trend and pushed the proportion as high of 49.5% in 1993.

Who bears the burden of government debt and why?
The current consensus among economists is that the burden of the national debt is largely shifted forward to future generations. However, the burden imposed by the government national debt does not arise from debt per se, but from budget deficits that gives rise to a Government debt.

The Traditional View of the Burden of a debt may be a government debt a burden on a country? If it is, what is the nature of the burden? Who bears this burden? Questions such as these have perplexed economists at least since the days of Adam Smith, for Great Britain in his day had accumulated a large national debt fighting the Seven Years War (the French and Indian War) and was about to add a further considerable sum suppressing the rebellion in its American colonies.
Interestingly, mainstream macroeconomics views the burden of a national debt, not in terms of the debt per se, but in terms of government budget deficitsthat are the cause of the debt and its growth. Thus, the burden that a government debt imposes on united states is because of the government’s budget deficits.5 to ascertain clearly the character of this burden and who bears it, assume that the country’s resources are fully employed which capital (or saving) cannot flow internationally between countries. Also assume that this country now engages in a war with a neighbor and that the increased expenditures associated with the war lead to a budget deficit that is financed by issuing bonds.

The increase in government expenditures increases aggregate demand. In a fully employed economy, additionally to raising prices, the rise in demand will result in a rise in interest rates.
The increase in interest rates is the means by which the government obtains the additional resources to fight the war for the increase will discourage interest-sensitive spending by the private sector. This is primarily business spending for capital goods like plant, equipment, and structures and spending by households for homes, automobiles, appliances and the like.

Thus, the budget deficit “crowds out” private capital and therefore the burden of the growing government debt represented by the bonds issued to finance the war, is decrease in the private capital stock of the country. Since the private capital stock inherited by future generations are going to be smaller, it implies that the level of output enjoyed by them will be lower. The lower level of output is thus the final word burden of the debt and it's a burden that's largely shifted forwarded to future generations.

If Government debt reduces national saving then investment and net foreign assets will be lower, wheich means a lower standard of living for future generations. But if taxes are lump-sum and Ricardian equivalence holds then there is no burden.