CLA2

Running hHead: UNITED STATES NATIONAL DEBT

1

UNITED STATES NATIONAL DEBT 4

UNITED STATES NATIONAL DEBT Comment by Writing Center: Not in all caps

Akhil Gadiparthi

BUS 505 Managerial Economics

Jun 30, 2019

Simin Hojat

Westcliff University

United States National Debt Comment by Writing Center: Great, just not bolded

Latest reports indicate that the United States nNational dDebt has now hit $22 tTrillion. This being is the highest point it has ever reached in the country’s history. Over the years, we have witnessed a drastic drop in tax revenue and a significant rise in federal spending. From the time President Trump assumed office in 2017, the nNational dDebt has increased by approximately $2 trillion in two years (Hallender, 2019). Despite the country being the most powerful country in the world, annual budget deficits keep on increasing, leaving the national dDebt to soaring. up. Comment by Writing Center: Where did you find this fact? Cite (Author’s Last Name, year) Comment by Writing Center: Thesis statement? Remember: https://edpuzzle.com/media/5abe932cff173e40f02ef96d

History of the United States National Debt

The American Revolutionary War saw the first instance when the United Statescountry incurred national dDebt. This was undertaken by the first United States tTreasurer, Michael Hillegas. From this time, the Public Debt has been escalating significantly, although it did but decreased between 1835 and 1836. It is was during the periods of recessions and wars, that the country has seen high national debts. It has, therefore, been measured against the country’s GDP. Under these measurements, the National Debt had reached its highest during Truman’s pPresidential term, which was subsequently after World Wwar II 11 (Hall & Sargent, 2015). When Jimmy Carter and Bill Clinton came into power, there was seen a significantly low level of Public Debt. Comment by Writing Center: What is this? Specify Comment by Writing Center: Not capitalized Comment by Writing Center: Specify what ‘it’ refers to Comment by Writing Center: Not capitalized Comment by Writing Center: Not capitalized

Decreased military expenditure in the subsequent years made the dDebt to drop significantly (Hall & Sargent, 2015). Over those years, the public debt graph has been erratic with instances of high and low states. In the 1980s, there was an increase ind military spending, especially during the reign of President Reagan. Under President’s George W. Bush reign, the national debt went up by $5.9 trillion, which was the second largest. The 9/11 terrorist attacks dramatically reshaped the U.S. economy. Military spending surged to $600 billion/year, and thus, the wWar on terror attributed greatly to this the rise in national debt (Hall & Sargent, 2015). Further, Tax Relief and economic growth Acts contributed largely to the situation when , whereas the pPresident was caught in the midst of in the 2008 country’s economic crisis. According to Hallender, (2019), the national Debt , however, nearly doubled during Obama’s reign. When he came into power, the Debt was about $10.5 trillion. where Iit rose to about $20 trillion by the time he was leftaving the office. These increased debt levels were greatly attributed to the wars in Afghanistan and Iraq, where the government spent significant resources (Hallender, 2019). Comment by Writing Center: Use a different word choice here Comment by Writing Center: Which did what to the debt? Specify Comment by Writing Center: Not capitalized Comment by Writing Center: Not capitalized Comment by Writing Center: Not capitalized Comment by Writing Center: Not capitalized

Rising costs in Medicare and social security, which were President’s Obama’s main agenda focus also contributed to this. Today, under Trump’s reign, the National Debt stands at $22 tTrillion. Economists project the debt levels to soar higher as Trump signed thes $1.5 trillion tax cut bill, and as well as due to his plans to build a wall along the Mexican bBorder (Hallender, 2019). Federal spending is also expected to increase from about 20% of the GDP to about 23 % by the year 2029, like and MedicareMedicare and social security are expected to take a large portion of this (Hallender, 2019). Figure 1 Comment by Writing Center: Not capitalized

The following representation shows how the Public Debt has risen between _____. Comment by Writing Center: Not capitalized

Comment by Writing Center: Create a citation for your figure underneath it and centered: Figure 1. Descriptive caption of image. From Image Title, by Creator's Name, Year of creation, Database/URL.

Consequences of a Llarge National Debt

A sizeable National Debt is expected to hasve significant consequences for the policy-making processes and the economy at large. Some One of the considerable effects include is the the following: Comment by Writing Center: Not capitalized

rReduced National Savings and Domestic Income. Mian et al., (2014) contends that sustained fFederal deficits in large volumes have been seen to lead to decreased investment levels and high-interest rates. When the gGovernment borrows more, a more significant percentage of the savings that cancould have been diverted to investments is instead used as government securities. This, in turn, leads to reduced investments in the private sector, having a negative effect on the income of individuals in the population. Wages are primarily determined by productivity from workers, who are mostly employed in the private sector. Comment by Writing Center: Not capitalized Comment by Writing Center: If there are not more than 6 authors – list all of them here

Secondly, there is an iIncreased rRisk of a fFiscal cCrisis. The larger the national’s dDebt, the higher the risk of entering into a fiscal crisis. As Debt continues to soar, investors reach a point where they lose confidence in the Government’s ability to repay the existing Debt. It is at this point that the investors demand high-interest rates, which could cause grave economic effects. Further, the market value of government securities, including bonds, drastically reduce, which may cause massive losses for investors (Mian et al., 2014). Thheise kinds of losses may be large enough to prompt the fall of financial institutions in the country. Comment by Writing Center: Not capitalized Comment by Writing Center: Not capitalized Comment by Writing Center: Not capitalized

A third effect is lLess of aner ability to respond to uUnexpected eEvents. Every working Government tends to borrow money to cater for to unexpected events such as financial crisis or, natural disasters such as floods, droughts, and earthquakes. This tendency to borrow however works well only when the country’s National Debt is at a sustainable levels. Wright (2008) states that a country with high debt levels may be unable to do this since lenders may be reluctant to provide funds to such countries. The options drastically reduce in such a case. Besides, if a government is keen to on stimulatinge the economy, it they can comfortably do this by increasing spending and use of tax cuts. This, however, cannot be actualized when the country’s Debt is on the high side. Comment by Writing Center: Not capitalized Comment by Writing Center: Not capitalized Comment by Writing Center: Not capitalized

Another consequence of growing national Debt is the transfer of the burden to future generations. Most of the debts lent today, have a repayment period of up to 30 years, meaning, the children we are bringing up today, might be burdened with repaying a massive debt. However,, they never enjoyed the benefits of that acquired debt. This particularly becomes worse when Debt borrowed is spent on federal spending rather than investments on in the infrastructure and or in other public goods (Stiglitz, 2003). The Government should, therefore, be mindful of its actions before it becomes a burden to others. Comment by Writing Center: Not capitalized Comment by Writing Center: Not capitalized Comment by Writing Center: Not capitalized

Is the National Debt going toand hamper Economic Growth?

Absolutely Yes. As discussed above, a high national debt, such as we are contending with today, may hamper economic growth in no small extent. When the Government borrows more, a more significant percentage of the savings that can could have been diverted to investments is preferably instead used as government securities (McGuigan & Moyer, 2013). This, in turn, leads to reduced investments in the private sector, having a negative effect on the income of individuals in the population. Wages are determined mainly by productivity from workers, who are mostly employed in the private sector. When the private sector suffers from a lack of incentives, it has a similar effect on the economic growth of the country (McGuigan & Moyer, 2013). Comment by Writing Center: Nope, write this out as a full sentence. The national debt …… Comment by Writing Center: Not capitalized Comment by Writing Center: Didn’t you write this verbatim above? Please adjust here – you do not want to repeat yourself. Add detail

Is it possible for the US to default on its Debt in the Future? Explain. Comment by Writing Center: Do not use the questions as your title. Instead, write the topic instead. Example: Possibility of Defaulting

No. This is an impossible occurrence. According to Mian et al., (2014), cCongress has threatened to curtail the debt ceiling as they projected the consequences that would arise. They, therefore, put pressure on Obama’s administration to cut on Medicare, Obamacare, and Medicaid. This, however, did not work as the cCongress later paved the way for the debt ceiling to be raised. Investors are were getting concerned whether the United States would default on its nNational dDebt (Mian et al., 2014). Comment by Writing Center: This is the danger with writing out your headings as questions. You cannot just start your paragraph by answering it in academic writing. We need a full sentence here.

The primary reason why the United States would never default on its Debt is, every dollar in Debt is impeded to the currency. In contrast to other countries, the United States does not have to look for more foreign exchange. Alan Greenspan, says that the country would will comfortably pay its debts, since unlike many other countries, it can print money and repay the Debt. This is because the national Debt is put In terms of the United States dollar form (Mian et al., 2014). Comment by Writing Center: Not capitalized Comment by Writing Center: Not capitalized Comment by Writing Center: This is unclear – can you rephrase for me here? Comment by Writing Center: For more foreign exchange? Comment by Writing Center: Not capitalized Comment by Writing Center: Not capitalized Comment by Writing Center: Not capitalized

Table showing the list of Years and the Debt taken in the United States since 2002 to 2016 Comment by Writing Center: Explain and introduce your table within your text. In order to title it, please follow: Table 1. Title of table (Underneath it, you can include the citation information)

Fiscal year	Total debt, $Billion	Total debt as % of GDP	Public debt, $Billion, 1996–	Public debt as % of GDP	GDP, $Bln, BEA/OMB ]
2002	6,213	57.1%	3,550.00	32.7%	10,900.0
2003	6,783	59.9%	3,900.00	34.6%	11,350.0
2004	7,379	61.0%	4,300.00	35.6%	12,100.0
2005	7,918	61.4%	4,600.00	35.7%	12,900.0
2006	8,493	62.1%	4,850.00	35.4%	13,700.0
2007	8,993	62.8%	5,050.00	35.3%	14,300.0
2008	10,011	67.9%	5,800.00	39.4%	14,750.0
2009	11,898	82.5%	7,550.00	52.4%	14,400.0
2010	13,551	91.6%	9,000.00	61.0%	14,800.0
2011	14,781	96.1%	10,150.00	65.8%	15,400.0
2012	16,059	100.2%	11,250.00	70.3%	16,050.0
2013	16,732	101.3%	12,000.00	72.6%	16,500.0
2014	17,810	103.4%	12,800.00	74.2%	17,200.0
2015	18,138	101.3/101.8%	13,100.00	73.3%	17,900.0
2016 (Oct. '15 –	19,428	106.1%	13,998.00	76.5%	18,200.0

Why the Nobel-winning economist Paul Krugman is not as alarmed as many others are concerning the high level of US national debt? Comment by Writing Center: You try this one – not a question. Place just a topic for your heading here

Paul Krugman argues that the United States has been borrowing money since the American Revolutionary War wars, and this is not going to stop todayanytime soon. Many lenders to the US, including domestic lenders, lend money at a meager interest rates. This money is mostly used on infrastructure, Medicare, and other forms of funding. Paul Krugman, therefore, maintains that the country should take this advantage, borrow more, and use the money on infrastructure and healthcare (McGuigan & Moyer, 2013). Comment by Writing Center: Okay but give more here why does he think this should be done? Why is debt not a problem in his eyes?

Conclusion

As noted from the above report much has been noted on the national debt, which refers to

the total outstanding borrowings of the national or central government that incorporates both the

internal and external debts. In the report, the country of interest that has been discussed is the

United States. The United States in this case currently has over $14 trillion as the public’s

national debt which of course is alarming to both the federal government and the citizens as well

Conclusion

As discussed from the above, reports on the national debt is , which explainsthe total outstanding borrowings of the federal government that incorporates both the internal and external debts. From the above given data, the United States in this case currently has over $22 trillion as the public’sof national debt, which of course, is alarming to both the federal government and the citizens of United States. As well in the paper also been discussed on Tthe consequences that of this debt include are likely to accompany massive national debts such as increased cost of living, lagging growth of wages and also inequality of amongst generations. among others. Comment by Writing Center: Offer a concluding thought.

References Comment by Writing Center: Put all in alphabetical order

Hellander, I. (2019). Beyond Obamacare: Life, Death, and Social Policy. Social Forces. Comment by Writing Center: Website? Adjust - Citing Websites – Click here

Hall, G. J., & Sargent, T. J. (2015). A history of us debt limits (No. w21799). National Bureau of Economic Research. Comment by Writing Center: Is this also a website? Citing Websites – Click here

Hargreaves, E. L. (2013). The national debt. Routledge. Comment by Writing Center: Location: Publisher

Mian, A., Sufi, A., & Trebbi, F. (2014). Resolving debt overhang: Ppolitical constraints in the aftermath of financial crises. American Economic Journal: Macroeconomics, 6(2), 1-28. Comment by Writing Center: Retrieved from URL

Stiglitz, J. (2003). Dealing with debt. Harvard International Review, 25(1), 54. Comment by Writing Center: Retrieved from URL

Wright, R. E. (2008). One nation under debt: Hamilton, Jefferson, and the history of what we owe. McGraw Hill Professional. Comment by Writing Center: Location: Publisher

McGuigan, J. R., & Moyer, R. C. (2013). Managerial economics: Aapplications, strategies and tactics. Comment by Writing Center: Where is the remainder of the information? I can’t tell what kind of reference this is