Question

Essay about the economic issue in the USA and comparison with South Africa economic issue?   

Answer 1

USA economic issue

  U.S. Debt - U.S. government had increased the deficit from $6 trillion to $9 trillion over the previous decade. And rightly so: that 50% growth rate was higher than the growth of the GDP. But since 2008 U.S. debt has grown to $15 trillion, or +67% in just a few years. USA can raise taxes but every dollar that comes out of the private sector misses the positive economic multiplier impact and diminishes GDP growth. USA need GDP growth in tandem with debt reduction to create a balance. Net, regardless of what we do with taxes, USA must cut government spending. The U.S. debt is the sum of all outstanding debt owed by the federal government. It exceeded $21 trillion on  March 15, 2018. Two-thirds is debt held by the public. The government owes this to buyers of U.S. Treasury bills, notes and bonds. That includes individuals, companies and foreign governments. The remaining third is intragovernmental debt. America's debt is the largest sovereign debt in the world for a single country. It runs neck and neck with that of the European Union, an economic union of 28 countries.?  The debt is greater than what America produces in a whole year. This high debt-to-GDP ratio tells investors that the country might have problems repaying the loans. That's a new and worrying occurrence for the United States. In 1988, the debt was only half of America's economic output.  First, the debt is an accumulation of federal budget deficits. Each new program and tax cut adds to the debt. Over the long term, a growing federal debt is like driving with the emergency brake on. As the debt-to-GDP ratio increases, debt holders could demand larger interest payments. They want compensation for an increasing risk they won't be repaid. Diminished demand for U.S. Treasurys would further increase interest rates. That would slow the economy. Lower demand for Treasurys also puts downward pressure on the dollar. That's because the dollar's value is tied to the value of Treasury Securities. As the dollar declines, foreign holders get paid back in currency that is worth less. That further decreases demand. Also, many foreign holders of U.S. debt are investing more in their own countries. At that point, the United States will have to pay exorbitant amounts just for the interest. To find out current interest payments, see Federal Spending.

Comparison with South African Economic Issue

1] If we compare debt of USA to South Africa then it is 73.8% of GDP (2016) to 43.3% of GDP (2012 est.)

2] Main reasons for debt to grow for SA are recession, slow growth and unemployment while for USA it is slow growth as well as introduction of various new programs,govt spending etc.

3] Debt issue is huge in USA compared to SA.

4] US debt is much larger than debt of SA

5] US debt has been growing since long time so it has reached to new heights which isnt exactly is the case for debt to grow in SA in fact SA had lowest debt in earlier years