Question

Does it matter that our current national debt equals $26.5 trillion? (Wasn't it equal to approximately $21.5 trillion at the start of 2020, not even 6 months ago?) Does anyone benefit (or lose out) due to this public debt?

Try to focus beyond just the response to COVID-19 for the above question.

Answer 1

The before the spread of covid-19, the government national debt level was close to the 108 % of GDP or it was 21.6 trilion. There is sharp rise in the level of debt following the covid-19 pandemic.

The higher debt level is matter of worry for the stability of economy if there is no growth rate or growth rate has slipped into the negative. The covid-19 has led to the fall in the growth rate and unemployment rate is too high. Thus rising debt is matter of worry. it might produce debitizing impacts over the long run. The rise in the growth and productivity are most critical factors to maintain the such high level of debt. Further, the larger part of national debt is owned by the foreigners , it might cause worry for the government as well. the government is supposed to pay the higher interest rate on the foreign borrowings.

The debt has both positive as well as negatives. the debt rise leads to the rise in the aggregate demand in the economy, so profits of businesses would see the rise and problem of deficient demand can be addressed appropriately. But the excessive debt spending on the unproductive activites would cause the hardships for the future generation and future generation would be liable to pay for the debt servicing. thus, debt would not be problematic if it is spent on the productive activities.