Question

Question:

Explicate the key reason that the US has been running deficits for the last close to 40 years, and presently, is the largest debt nation globally. The US net international Investment position is approximately $ 12 trillion.

Answer 1

The national debt level of the United States is a measurement of how much the federal government owes its creditors. Since the government almost always spends more than it takes in, the national debt continues to rise. Specifically the national debt is a term referring to the level of federal debt held by the public, as opposed to the debt held by the government itself.

While the debt can be measured in trillions of dollars, it is usually measured as a percentage of gross domestic product, the debt-to-GDP ratio. (KEY REASON)That's because as a country's economy grows, the amount of revenue a government can use to pay its debts grows as well. In addition, a larger economy generally means the country's capital markets will grow and the government can tap them to issue more debt. This means that a country's ability to pay off debt, and the effect that debt might have on the country's economy is dependent on how large the debt is as a proportion of the overall economy, not the dollar amount.

What Makes the Debt Worse?

History tells us that among the top expenses, the Social Security program, defense and Medicare were the primary expenses even during the times when the national deficit levels were low, as they last were in the 1990s. Then how did the situation worsen? There are various opinions on the matter.

The Overburdened Social Security System

Some argue the mechanism to finance Social Security has led to increased expenditures without obvious payoff. Payments are collected from present-day workers and used for immediate benefits—that is, payments to existing beneficiaries.

Due to the increasing number of retirees and their longer life spans, the size and cost of payments have skyrocketed. Parents having fewer kids are limiting the pool of present-day contributing workers. Recent economic downturns have also led to stagnant pay. Overall, limited incoming and more outgoing cash flows are making Social Security a big component of the national debt.

Continuing Tax Cuts

Originally introduced during the George W. Bush administration, tax cuts continue to add to the burden. That effect was heightened by the passage of President Trump's Tax Cuts and Jobs Act in 2017, which cut both corporate and individual taxes.

Wars in Iraq, Syria, Pakistan and Afghanistan

Primarily within the defense budget, continued involvement in these engagements has cost the U.S. massively, adding to the national debt. Around $5.9 trillion has been spent on these engagements since 2001, according to a study from the Watson Institute at Brown University.

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