Does Debt Matter
History of United States National Debt
The National debt has been a reality since the years of independence in United States of America, as by the year 1776; leaders were still financing wars in the fledgling nation through borrowing. The practice that saw the debt grow to above $75 million after the American Revolutionary War of between 1775 and 1783, and considerably increased to $120 million over the decades. It was until President Andrew Jackson era that the debt shrank to zero and this has been the only time United States has been a free debt nation. Over 200 years later, after country inception, crash in stock markets, failed investments by big companies, unemployment rising rates, and tech bubble bursting, the federal
…show more content…
French government gave a loan of over $2 million after negotiation with Benjamin Franklin and the Dutch would also give considerable amounts in the era of President John Adams. After 2 years of war, the Department of Finance would announce the national debt which had reached $43 million for the first time. By September 1815, the debt stood at $119.2 million. President Andrew Jackson directed the treasury Department to issue bonds in an attempt to pay part of the debt. He would then sell the federal owned western lands and blocked infrastructure projects spending which enabled him to clear the debt in six years at office. Prosperity time was however short-lived, printing of money by state banks began, …show more content…
This has not been a big problem over the past decades as there were low interest rates. A report by CBO indicated that the debt payments’ Net interest is represented by a 6.8% of the 2017 federal budget which is $276.2 billion in figures in comparison with 15% in the 1990s. However, in the coming years with the post-recession campaign, the national debt servicing cost will nearly triple as expected by 2027.Thereby, the United States government will be paying high payment interests than its paying on national
In his First Report on Public Credit, Alexander Hamilton discusses the current financial situation of the United States and, as a response, proposes a plan to take care of the debt accrued from the Revolutionary War. Hamilton 's address tells the story of a significantly indebted newfound nation in desperate need of financial reorganization. He first discusses the strain that could be placed on public credit from public engagements and that the expensive engagement of war against Britain was the price to pay for liberty. Subsequently, he delivers his plan, which focused on the full payment of foreign loans, redemption of bonds (which would create new debt, but nonetheless establish good federal credit), and the assumption of individual state
Washington next urged Americans to be overly mindful of the spending and borrowing of national monies. He relates this by declaring “As a very important source of strength and security, cherish public credit” (Washington, 1796). He cautions that credit should be used sparingly and not to accumulate debt that will be a burden to posterity. He also sympathizes that taxes, though necessary to build revenue, should not be
During his term as secretary of the treasury, he acted with the power and commanding force of a Prime Minister. None of the other founding fathers contributed as much to the economy’s growth, and the shape of the country in general, as he did. Alexander Hamilton was the most influential of the United States’ early politicians in the development of the country’s economy. One of the earliest examples of Hamilton’s power was his role in the national assumption of state debts. After the Revolutionary War, individual states had varying amounts of debt.
Moreover, individual borrowers are not the only ones who face the consequences of the loan default. The federal government recovers around 80% of the total defaulted amount of student loans, losing billions of dollars each year. The latest data from the U.S. Department of Education indicates that student loan default rates have been rising. Official 2011 default rate is 10%. ("Comparison of FY 2011 2-Year Official Cohort Default Rates to Prior Two Official Calculations"). The New York Federal Reserve reported that as of March 31, 2013 outstanding student debt surpassed credit card debt and was approaching the $1 trillion mark (Quarterly Report on Household Debt and Credit). If student loan default rates stay unchanged, the federal government will lose $200,000,000,000 of taxpayers’ money over the next few decades because of student loan defaults. Below is the chart representing the outstanding credit card and student loan debt over the last ten years (Quarterly Report on Household Debt and Credit).
The United States debt, as of the fiscal year ending 2013, was $16,738 (in billions). The chart below depicts how the government debt has changed over the previous 10 years. According to the New York Times, as of June 2014, China is now the Largest Corporate Debt Issuer, surpassing the United States. The Standard and Poor’s ratings show that the Chinese nonfinancial companies had approximately $14.2 trillion in debt compared to the United States which had about $13.1 trillion. S & P also estimates that China will have more than $20 trillion in debt by 2018, and that will make up for one third of the worldwide corporate borrowing.
After the first War for Independence, The United States was approximately $52 million in debt. Due to having such bad financial problems, the United States created a national Bank to create one unified currency, to take away all state debts, and to issue loans to the people to promote growth. This National Bank was created by Alexander Hamilton who was a Federalist, and once Jefferson came to be the President, he continued the idea of the national bank because it was helping to reduce the national debt. The primary reason for the National Bank being a representation of a Federalist idea was because since it was issuing loans to people it was able to promote industrial growth which was one of the main goals of the Federalist party. From Jefferson continuing the use of the National Bank thru his presidency he demonstrates his need to continue a loose constructionist idea.
However the interest we pay on our nation 's debt is very small compared to the overall budget. According to the Center on Budget and Policy Priorities only 7% of the total budget is spent on interest which is relatively low compared to things like social security which took up 24% of the budget in 2014 (Policy Basics). As long as the United States can continue to keep the interest rates low the debt will continue to be a begin threat. If the creditors of the U.S. were to spike their interest rates, America would be in trouble, however America has fairly good credit, and it should remain that way unless there is another scare like the government shutdown in 2011 (Riley). Overall the threat of the nation debt is a very minute problem in the grand scheme of things. According to The Richest, only five nations in the entire world are completely debt free, which is astounding when you consider that there are about 195 countries in the entire world (Mathers; How Many). These figures show how extremely difficult it is for a country to run without having a certain amount of debt, and America having debt should not be a concern. America is not even in the top ten countries whose debt make up the majority of their GDP (Country List). Which means that at the moment American’s should not be overly
Every day in New York City, hundreds of people walk past a huge digital billboard with giant numbers across its face. Each person who walks past this billboard sees a slightly different arrangement of numbers, growing larger every second. This board is the National Debt Clock, representing the over 14 trillion dollars currently owed by the United States. While some people claim that the national debt is caused by the falling economy, most maintain that the debt itself causes the poor economy (Budget Deficits 2007). Rising debt leads to higher interest and investment rates, and cuts into our national savings. Ignoring the national debt leaves the major burden of paying it off to later generations, while meanwhile allowing our country’s economy to further drop and our dependency on other nations to rise.
The title stems from when Alexander Hamilton wrote to Robert Morris about funding for the new nation stating, “‘A national debt, if not too excessive, will be to us a national blessing.’” The author makes an emphasis on this quote by showing how the United States has used the debt to fund and then pay off huge projects such as The Civil War, The Great Depression and World War II. If these events haven’t been funded using the national debt, than the country as we know today could have been dramatically
The U.S budget deficit over the years has been a problem but lately the deficit has shrunk. However, what made the U.S budget deficit get to where it is today and what will it be like in the years to come. Throughout the past the U.S has operated under a deficit. This means that the U.S Spent more money than it was taking in. The cause of the excess in spending was different depending on which year. Some of the causes were war, increase in spending , and economic downturns. There were different acts passed to try and control the deficit problem. The deficit at the present time is declining. This decline is due to the improving economy, sequester, and a tax increase on high-income households. The big factor that went into the decline in the deficit for 2013 was the payment that Fannie Mae and Freddie Mac made. The deficit decline in the present time may make some think the U.S could get out of debt but it has been projected that the U.S deficit will start to increase once again.
On January 8th, 1835, a senator stood up to declare that the national debt had been paid(for now)(“npr.org”). This was a enormous moment in his presidency and U.S. history. This was an important thing to Andrew Jackson who hated debt, and though it was immoral(“npr.org”). At the start of his presidency, he disbanded the national banks, he hated the banks more than the debt. To begin the process of removing debt, Andrew Jackson blocked every bill to spend money(“npr.org”). After that, he began selling all of the land in the west because, there was a large demand as the country was expanding(“waltercoffey.com”). After Andrew Jackson was able to remove the debt, he was said, “Let us commemorate the payment of the public debt as an event that gives us increased power as a nation and reflects luster on our Federal Union.(Encyclopedia of Presidents)” However, this perpetual bliss could not last forever. Since the banks had been removed, Jackson had nowhere to put the money, so he gave it to the states(“npr.org”).The states then started printing massive ammounts of money, which caused the economy to enflate drastically(“npr.org”). In an effort to slow this down, Jackson required that all government land sales be done with gold or silver(“npr.org”). However, this caused the economy to crash. After that, we went into a depression, which we were only able to get out
Businesses and families borrow money to start up their business, to run their households and this amount has risen dramatically over the last two decades. According to John Miller, “in 1990 the household debt owed by families was 60.2% which has increased in 2010 to 92.5% and the total debt of businesses in 1980 was 53% whereas in 2010 it jumped to 74.3%” (2011, p. 36) Another words our budgets are not any more balanced than our governments without borrowing. Our government has borrowed and put money into our economy in order to try and give our economy a boost into the right direction. Miller states, “In 2008, the U.S. government spent $253.8 billion on expenditures that will boost the productivity of the economy and help to provide the tax revenue to service our national debt” (2011, p. 37) Our high school seniors need to be taught the appropriate times when to spend money and when they should invest to boost their future.
When it comes to achieving success in the working industry and accomplishing a successful career an education is important. Getting a degree is essential to be successful. The issue is the higher the education the person wants the higher the cost is. Nowadays, not everyone can afford paying out of pocket for an education, which mean that students are forced to take out large amount of student loans to achieve that degree. Student debt is an ongoing problem, students are gaining oversized debts that most of the time if not ALL are defaulting and jeopardizing future credits. How much debt it too much debt? Everyone should have the liberty to
“Blessed are the young for they shall inherit the national debt” (Hoover). This is a quote from Herbert Hoover, 31st president of the United States. What the quote is saying is that the debt the country is building up at that time, will be dragged down to today causing problems. A national debt is when a country is borrowing more money than they are making and this has been the problem in the U.S since the founding of our country. This seems to be a problem for us, it seems that we want to spend, and spend, and spend, more money than we can make to achieve something or to satisfy our own needs. This is screwing us over in the long run, causing us to slowly mess up or country's economy. Over the growth of our country the debt has decreased and
Veldhuis, Neil. “Beyond our means: Government debt tops $1.2-trillion and spending is still rising.” Financial Post. National Post, 16 May 2013. Web. 23 Feb. 2014.