“Eventually, you rack up huge debts and nobody trusts you anymore,” he explained. When debt gets this high, it can alarm investors, said Raghuram Rajan, a professor of finance at the University of Chicago’s Booth School of Business, who also served as chief economist at the International Monetary Fund. And that’s not as benign as it might sound. “Probably not.”Īnother potential consequence of the debt? Trust issues. “Is that where Americans want their hard earned tax dollars going?” asked Snyderman. Of course, some consequences we do know, like the amount of interest we pay on that debt: about $2 billion a day, and by 2050, the Congressional Budget Office projects the interest payments on our debt will be the country’s single biggest expense. That’s the funny thing about the national debt: Although the numbers are knowable, very often the consequences are not. In fact, this very question sparked a major debate among economists in the last few years. So if you’re a country, is a lot of debt really bad? Not so bad? The truth is, we just don’t know. So, if my friend Ralph was spending 120% of what he earned, I would strongly recommend he go on a strict spending regimen and probably stop eating Subway sandwiches entirely.īut countries are different - they can print their own money. Our debt is around 120% of what our economy generates in a year that’s our debt-to-GDP ratio. “ What this really shows is that the United States likes spending money more than it likes bringing in revenues,” Snyderman said. The United States’ gross domestic product, or GDP, which is the sum total of all the goods and services we produce in a year, is about is about $27 trillion. The $34 trillion is also bigger than our own economy. Add to that the economies of Japan, Germany, India and the United Kingdom, and combined they generate about $34 trillion a year. Maybe it’s more useful to put that number into an economic context: $34 trillion is bigger than the Chinese economy. (Does it help if I tell you that if you had 34 trillion footlong Subway sandwiches and stacked them end to end, you could get to Neptune and back? Probably not so helpful, but maybe NASA needs to know about this, and also it’s been too long since I’ve had a meatball sub). Still, she said, when the numbers get this big, they’re almost impossible to really understand. “That is a really hard number to really understand, right?” said Rachel Snyderman, the director of economic policy at the Bipartisan Policy Center in Washington, D.C.ĭebt can be a great thing, she said, helping to fund important programs and deal with crises. Yet again, Congress will have to come to a budget agreement or risk a government shutdown. How high should the government’s debt be? Is it bad to be in a lot of debt? Should we make painful cuts to bring the debt down? These are questions coming up a lot lately, as the government comes up against another budget deadline in early March. (That’s the national debt, the total amount the federal government owes its creditors.)Īnd now the $34 trillion question: Should we change our hard-charging ways, or should we stop worrying and learn to love the debt?
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