WASHINGTON (AP) – The government has reached a dubious stage this week: its debt has exceeded $ 22 trillion, or billions, with a "t" – for the first time.
Stacks of federal debt have been growing steadily for years, fueled by accumulated annual deficits, themselves caused by tax cuts, increases in public spending, rising costs of Medicare and Social Security, and the interests of the debt itself.
Under President Donald Trump, the national debt has exceeded $ 20 trillion (September 2017), $ 21 trillion (March 2018) and now $ 22 trillion. As a presidential candidate, Trump had absorbed President Barack Obama's $ 1 trillion annual deficit and declared that in his capacity as president he could eliminate all the debt. Now, Trump predicts that his own annual deficits will reach $ 1 trillion for a time.
So what is the national debt, why does it continue to rise and how much should we worry about it? Here are some questions and answers:
Q: What is the national debt?
A: This is the total that the government has borrowed to finance its operations beyond what it has been collected over the years in revenue from taxes and other sources. Debt has become a permanent source of tension, partly because it fears to paralyze the nation's ability to finance future operations and cripple future generations. Since the late 1990s and early 2000s, the US government has not had a surplus, a luxury that allows it to reduce debt and fund other needs.
Q: How is the debt different from the deficit?
A: The deficit is the difference between the revenue the government receives and the expenditures it spends in a given fiscal year. The accumulation of these annual budget deficits, combined into one, represents the debt. Because the government typically spends more than it collects, it must borrow to make up the difference. For the 2018 fiscal year, which ended on September 30, the deficit amounted to $ 779 billion. This gap between spending and revenue was the largest since 2012, when the deficit was $ 1.1 trillion. That year, under the Obama administration, the government had increased spending and cut taxes to keep stimulating the economy in the aftermath of the 2008 financial crisis and the Great Recession.
Q: Who holds all the debts that the government borrowed?
A: A misconception is that most of the US debt is held by foreigners – in China, Japan and elsewhere. But in reality, the biggest creditor of America is … America. Sixty-two percent of the federal debt is held in the United States – by the Federal Reserve, the social security system, banks, pension plans, mutual funds, insurance companies, and the United States. individual investors.
In fact, the largest share – $ 5.9 trillion, or about a quarter of the total – is the money that the government owes in the form of trust funds. The most important is the trust fund of social security. The government used this money, intended to pay social security benefits, to finance other expenses. But once this money is needed to pay social security benefits, the government must replenish the amounts borrowed – with interest. If the deficit is still in deficit, the only way to do it is to get into more debt.
Public debt – $ 16.2 trillion – is about three-quarters of the total. It is owned by investors in the United States and abroad, ranging from individuals and pension funds to foreign central banks. China is the biggest foreign owner of debt. It holds about $ 1.2 trillion in Treasury securities, followed by Japan, which holds about $ 1 trillion, according to the latest accounting.
Q: With interest rates still low, what is the concern about the size of the public debt?
A: It depends on who you ask. Many economists say they fear the rising debt will be a ticking time bomb that will eventually blow up the economy and derail the economy. This is particularly true, they argue, in the light of projections that annual deficits would still exceed $ 1 trillion and remain at these levels for years, as the government bears the increasing costs of social security benefits and social security benefits. Medicare Medicare of baby boomers who are retiring.
But some economists argue that interest rates are so low that the government should not worry about reducing deficits, at least not now. Instead, the government should focus on cost-effective public investments in areas such as education, infrastructure, health care and the protection of the environment.