The National Debt: A Crisis in America

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Recommended: Introduction to national Debt

The national debt of the United States is the total of all the obligations of the Treasury to pay money to the federal government’s creditors. By analogy, in judging whether a national debt is large or small, one ought to compare it to the income (or product) of the national economy because that income, through taxation or further borrowing, is the ultimate source of interest and principal payments on the debt. The accompanying figure presents the ratio of the national debt to the gross national product (GNP) of the United States from 1791 to 1988. National debt is the total financial obligation of the federal government. It aims to improve fiscal policy by establishing five principles of responsible fiscal management and by strengthening the reporting requirements.

The concept that relates to National Debt is education. President Bush has expanded the Pell Grant program through reforms to the student loan program. The expansion will provide more assistance for low-income students to receive higher education as well as indirectly lowering the national debt. The expansion of the Pell Grant program can prevent students from taking out large amounts of loan, which will then lower the public’s debt. The President’s Fiscal Year 2006 budget will increase the maximum Pell Grant award to $4,150 this year and $4,550 over five years to help more students. The President’s budget request will increase investments in Pell Grants by more than $15 billion over the next 10 years to provide extra assistance for the Nation’s low-income Pell Grant recipients.

Unlike the private debts, there are also promises to pay such benefits such as Social Security, Retirement Pensions and the national debt. Social Security is a massive fund that pays benefits to 30 million retirees as well as 15 million members of families where a parent has died or become disabled due to injury. Social Security and retirement pensions are in fact a large “obligation” to the federal government. There are actually a large number of federal publications that report the measures of Social Security obligations, but they do not report them as debts. This is because Social Security is not considered a liability, it’s because the government can increase or decrease these benefits at any time. There are a few policy recommendations that may help Americans as they reach the age of retirement. First of all, the percentage rate of retirement pensions should be increased, with that being done the strain on social security may not be so devastating, people will have more money from their pensions.

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