Question

Currently the U.S. national debt is over $20 Trillion. Many people feel the high level of the national debt is a very bad thing and it should be paid off.

1. Explain what would be involved in paying off the national debt.

2. List and explain 3 approaches to getting the money to eliminate the national debt. Include the impacts each approach would have on the U.S. economy.

3. State which approach you would use to get the money. Why did you select the approach that you selected and not the alternatives?

4. Thoroughly and completely explain how your approach would work to eliminate the national debt, and explain the impact your solution would have on at least 5 key economic variables?

Please answers all question. Thanks :)

Answer 1

When the economy is in pain, such as suffering from high levels of unemployment, governments can also seek to stimulate the economy by buying the very bond they have issued themselves. For example, the Fed implemented QUANTITATIVE EASING a couple of times since November 2008 to buy large amounts GOVT. SECURITIES and other financial securities to spur ECONOMIC GROWTH and aid recovery from the FINANCIAL CRISIS in 2007-2008. In the short-term, there are many experts who favor this tactic. Longer term, buying one's own debt has not proved to be any more effective than borrowing one's way to prosperity by issuing bonds.
Interest Rate Manipulation
Maintaining low INTEREST RATES is another way governments seek to stimulate the economy, generate tax revenue and, ultimately, reduce the national debt. LOW INTEREST RATES make it easy for individuals and businesses to borrow money. In turn, the borrowers spend that money on goods and services, which creates jobs and tax revenues. Low interest rates have been employed by the Unites States, the EUROPEAN UNION, the United Kingdom and other nations with some degree of success. That noted, interest rates kept at or near zero for extended periods of time have not proved to be a panacea for debt-ridden governments.

Raise Taxes
Tax increases are a common tactic. Despite the frequency of the practice, most nations face large and growing debts. It is likely that this is largely due to the failure to cut spending. When cash flows increase and spending continues to rise, the increased revenues make little difference to the overall debt level.
3.

While there are a variety of methods countries have employed at various times and with various degrees of success, there is no magic formula that works equally well for every nation in every instances. Just as spending cuts and tax hikes have demonstrated success