Question

How big is the U.S. National Debt? What percentage is it of our GDP? Is this a problem? How does it get repaid?

4 questions that's all in 1 answer please.

Thank you

Answer 1

The US national Debt is $26.95 trillion by the end of September 2020. It is much higher than the last year, due to spending done in the event of COVID-19 and resulting financial stimulus to the economy. It has been 107% as a percentage of GDP in 2019. It is expected to rise over 130% in 2020. The excessive rise in % is due to increase in spending and at the same time, shrinking of the GDP of the US economy.

This is not a problem in a way that, as long as US economy is expanding, producing goods and services in the economy and spending done in the past is giving returns in present and future. Further, spending done on development programs, also help get, increased level of growth in the futures. So, it is not a problem as far as US economy is concerned. Though, it negatively affects upon future generations in the form of higher taxes to be paid, higher deductibles to be paid and less benefits in terms of social security benefits. It brings more stress to the future generation and in this aspect, it is a problem.

It is repaid by reducing the spending and applying new taxes, to generate funds and repay interest on debt and then, repay the debt principal if some owners of the debt (creditors) wants to get back the invested funds.