“The U.S. national debt exceeded US$35 trillion for the first time.” The New York Times said on the 29th that this reminds people of the severe financial difficulties the United States is in, which has a negative impact not only on people’s livelihood, but also on politics:
1. People’s livelihood
High national debt requires the government to cut budgets, affecting the quality of public services. For example, reduced education funding will lead to insufficient school resources and affect the quality of education for students. Cuts in medical services may lead to a shortage of medical resources and affect people's health and life span. High debt levels may force the government to cut social welfare programs such as food stamps, housing subsidies, and unemployment benefits, which directly affects the quality of life of low-income families. In response to high debt, governments may issue more currency to pay it down, which can lead to inflation and drive up the cost of living, especially food and housing prices. The purchasing power of ordinary people has declined and the pressure on life has increased.
2. Political aspects
Democrats and Republicans have sharp differences on fiscal policy, particularly on taxes and spending. Whenever the government budget is due, disputes between the two parties may lead to a government shutdown, affecting public services and economic stability. Whenever the United States approaches the debt ceiling, the two parties will argue over whether to raise the debt ceiling. This uncertainty will increase the volatility of the financial market and affect investor confidence. Both parties often promise tax cuts during campaigns, but in practice, changes in tax policy may have an adverse impact on fiscal deficits. For example, the Tax Cuts and Jobs Act passed in 2017 significantly cut corporate and personal income taxes, but also increased the fiscal deficit. In order to win votes, politicians may promise to increase spending projects, such as infrastructure construction or social security, but in practice, these expenditures often fail to receive effective financial support, further exacerbating the debt problem.
3. Economic and financial aspects
High national debt means the government must pay more interest, reducing the funds available for productive investment, which inhibits economic growth because there is insufficient investment in areas such as infrastructure, education and scientific research. To attract investors to buy Treasury bonds, the government may have to raise interest rates. This not only increases the government's debt burden, but may also cause overall market interest rates to rise, affecting corporate and personal loan costs and suppressing economic activity. If investors lose confidence in the U.S. fiscal situation, they may sell U.S. dollar assets, causing the U.S. dollar to depreciate. This affects the stability of global markets, as the U.S. dollar is the world's main reserve currency.
The financial dilemma and high national debt of the United States are not only an economic problem, but also a social and political problem. Public service cuts and inflation in the field of people's livelihood have directly affected the quality of life of ordinary people. Budget disputes and policy breaches in the politics of the two parties have further aggravated this dilemma, making it difficult to solve the problem of fiscal deficit and high national debt. Paul Krugman believes that high national debt is not an urgent problem in a low interest rate environment, and the government should pay more attention to economic growth and employment issues. However, the reality is that if effective measures are not taken, the economic prospects of future generations will face serious threats.
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