National Debt

6 Key excerpts on "National Debt"

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  The Macroeconomic Environment of Business

  Core Concepts and Curious Connections

  • Maurice D Levi(Author)
  • 2014(Publication Date)
  • WSPC

    (Publisher)

  CHAPTER 2 National Debt

  “The government is the only organization that can run a deficit and still make money.”

  Anonymous

  Key Concepts: National Debt; fiscal deficit; public debt; gross debt; National Debt relative to national product; National Debt versus corporate and personal debt; foreign debt versus domestic debt; debt growth and pensions; debt retirement and inflation; debt incurred for infrastructure and human capital.

  National Debt AND FISCAL DEFICITS

  An economic magnitude which has attracted increased attention in recent years is the National Debt, also sometimes referred to as the public debt. The National Debt is the amount owed by the national government and is represented by the value of government bonds that lenders to the national government hold. The debt represents the accumulation of government borrowing that has occurred over past years to finance fiscal deficits. Just as the debt increases when the government runs fiscal deficits—spending more than it receives in tax revenue—it is reduced when there are fiscal surpluses, i.e., when tax revenue exceeds what the government spends. If we include intergovernmental debt and debt obligations such as social security we then have gross debt. The top part of Fig. 2.1 shows vividly why the National Debt has become a focus of attention; between 1980 and 2010 the U.S. National Debt increased by several hundred percent.

  A commonly-expressed concern is that National Debt represents a burden on future generations, and indeed, at the extremely rapid rate at which the debt is growing, it represents a future burden on people working today.

  Fig. 2.1. The U.S. National Debt has grown rapidly in recent years.

  Source: http://upload.wikimedia.org/wikipedia/en/3/3b/USDebt.png . While U.S. National Debt and public debt have both grown rapidly in the last three decades, their importance relative to the size of the economy is not greater than it was at the end of the Second World War.

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  America's National Debt

  Examining the Facts

  • Thomas Arndt(Author)
  • 2022(Publication Date)
  • ABC-CLIO

    (Publisher)

  The National Debt certainly does have an impact on the broader economy, including most of the textbook economic forces that are part and parcel of a free market. Interest rates, inflation rates, stock market prices, and practically all other economic metrics are in various ways affected by public-sector actions, especially the scale of its borrowing habits. Generally, the repercussions of growing public-sector debt are believed to create substantial benefits, at least in the short term, because aggregate demand is being created, spurring economic activity. However, critics of excessive federal government borrowing suggest that there are significant longer-term burdens associated with public debt increases such as upward pressure on interest rates and inflation rates, and likely suppressed returns in investment markets as well. The Facts: Many viewpoints converge on the notion that excessive government debt is harmful to the economy, broadly speaking. At a point, too much public-sector borrowing can certainly crowd out private investment, cause a spike in interest rates, inflate the money supply, and even precipitate a sizable financial crisis (one of confidence as well as actual valuation). The real question is where “appropriate” levels of borrowing end and “excessive” levels of borrowing begin. Demand-side economists of the 20th century, such as John Maynard Keynes, argued that public-sector deficit spending ought to be pursued aggressively as a default policy approach, particularly if and when economic distress or a substantial downturn was at hand. When the government spends more than it takes in, it issues bonds or other financial instruments to cover the difference. That amount of money can essentially be thought of as cash being injected into the economy, and as the thinking goes, it generates growth in production, employment, wages, and so on

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  What We Owe

  Truths, Myths, and Lies about Public Debt

  • Carlo Cottarelli(Author)
  • 2017(Publication Date)
  • Brookings Institution Press

    (Publisher)

  Part I THE PUBLIC DEBT PROBLEM Passage contains an image   ONE What Is Public Debt? Public debt—the total of the nation’s debts; debts of local and state and national governments; an indicator of how much public spending is financed by borrowing instead of taxation. —Definition of public debt from www.webster-dictionary.org

  Let’s start with the basics: what is public debt, and where does it come from? If you already know the basics, you can jump to chapter 2 , but it may still be worth reading the last two sections of this chapter, “Money and Public Debt” and “The Missing Debt.”

  The Basics: Government Deficit, Government Surplus, and Public Debt

  Never trust those who tell you that a government’s budget is like a household’s budget. In many respects it is not. And yet similarities in some basic aspects do emerge. So, let’s think about your own household. Your annual income is $60,000, but you need to spend $70,000. How do you bridge the $10,000 difference? You borrow from your bank at an interest rate of 5 percent, to be paid next year. If you start your year with zero debt, by the end of the year your debt will be $10,000. Next year, nothing changes, except that your expenses rise from $70,000 to $70,500 as you must pay the bank $500 for interest on your debt. Your bank, however, is generous and not only rolls over the initial debt but lends you another $10,500 to cover your new imbalance between your revenues and your spending. At the end of the second year, your debt has reached $20,500.

  Let’s now introduce some terms that economists use to talk about government finances. The imbalance between the government spending and its revenues (in the above household example, $10,000 in the first year and $10,500 in the second year) is called the government, or fiscal, deficit . The amount the government owes at the end of the year is the public, or sometimes government or national, debt (in the example above, $10,000 after one year and $20,500 after two years). It grows because the government has a deficit. Indeed, broadly speaking, public debt is the cumulative sum of all previous deficits.1

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  A Treatise on Political Economy

  • Gary Hull, Gary Hull, Jean-Baptiste Say(Authors)
  • 2017(Publication Date)
  • Routledge

    (Publisher)

  Chapter IX Of National Debt.

  Section I Of the Contracting Debt by National Authority, and of its general Effect.

  THERE is this grand distinction between an individual borrower and a borrowing government, that, in general, the former borrows capital for the purpose of beneficial employment, the latter for the purpose of barren consumption and expenditure. A nation borrows, either to satisfy an unlooked-for demand, or to meet an extraordinary emergency; to which ends, the loan may prove effectual or ineffectual: but, in either case, the whole sum borrowed is so much value consumed and lost, and the public revenue remains burthened with the interest upon it.

  Melon maintains, that a National Debt is no more than a debt from the right hand to the left, which nowise enfeebles the body politic. But he is mistaken; the state is enfeebled, inasmuch as the capital lent to its government, having been destroyed in the consumption of it by the government, can no longer yield any body the profit, or in other words, the interest, it might earn, in the character of a productive means. Wherewith, then, is the government to pay the interest of its debt? Why, with a portion of the revenue arising from some other source, which it must transfer from the tax-payer to the public creditor for the purpose.

  Before the act of borrowing, there will have been in existence two productive capitals, each of them yielding, or capable of yielding, revenue; that is to say, a capital about to be lent to government, and a capital whereon the future tax-payers derive that revenue, which is about to be applied in satisfaction of the interest upon the capital lent After the act of borrowing, there will remain but one of these capitals; viz. the latter of the two, whereof the revenue is thenceforward no longer at the disposal of its former possessors, the present tax-payers, since it must be taken in some form of taxation or other by the government, for the sake of providing the payment of interest to its creditors. The lender loses no part of his revenue: the only loser is the payer of taxes.

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  Public Economics and Finance

  • Bernur Aç?kgöz, Bernur Açıkgöz, Bernur Açıkgöz(Authors)
  • 2019(Publication Date)
  • IntechOpen

    (Publisher)

  • Public debts according to sources: internal debts and external debts ○ Internal borrowing refers to a country’s borrowing from own national resources. This borrowing has no effect on increasing or decreasing national income. ○ External borrowing refers to the resources provided from a foreign country that is repaid with principal and interest at the end of a certain period. External debt has an increasing effect on national income when it is taken and vice versa has a decreasing effect on national income when it is paid. • Public debt as a voluntary basis: voluntary debts and obligatory debts ○ Voluntary debts refer the debts that are lent to the state by its own will and desire. ○ Obligatory debts refer to the debts which are lent by forcing to take the bonds issued by the government. These debts are applied in times of war, natural disaster, or economic crises. In itself, it is classified as the debts taken by full compulsion, the debts taken by the threat of forcing, the debts taken by cre-ating the necessary savings, and the liabilities taken by the moral coercion. Productive and unproductive debts are also available. If the debts are used in con-struction, such as railways, power stations, and irrigation projects, which contribute to the productive capacity of the economy, they denote to productive debts. By this way, productive debts provide a constant flow of income to the state. The state gener-ally pays the interest and principal debt amount from these projects’ revenues. If the debts are used in the area such as war, famine relief, social services, etc., which do not contribute to the productive capacity of economy, they denote to unproductive debts. The state generally pays the interest and principal debt amount from taxes; therefore, these debts are a burden on the society [10–12] ( Figure 1 ). Today, rapidly increasing international relations have increased the importance of external debts.

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  History, the White House and the Kremlin

  Statesmen as Historians

  • Michael Graham Fry(Author)
  • 2016(Publication Date)
  • Bloomsbury Academic

    (Publisher)

  7 B e i n g a b o r r o w e r : t h e r e -e m e r g e n c e of t h e U n i t e d S t a t e s a s a d e b t o r n a t i o n Diane B . Kunz It cannot be a law that all nations shall fall after a certain number of years. God does not work in that sort of way; they must have broken some law of nature which has caused them to fall. But are all nations to sink in that way? As if national soil, like the soil of the earth must lie fallow after a certain number of crops. (Florence Nightingale, Letters From Egypt) 1 In 1985 a milestone was reached: from being the world's largest creditor nation the United States transformed itself into a debtor on international account, a position it had jettisoned during the First World War. Thereafter, the American financial position has continued to deteriorate. Its balance of payments deficits have grown worse while simultaneously, individually and as a nation, Americans have embarked on a massive borrowing binge. The statistics tell a frightening story. During the two decades before 1982 total debt had held steady at 160 per cent of Gross National Product. But in the years 1982-6 the ratio of total debt to GNP leapt to 200 per cent. 2 In 1981 the federal deficit stood at what then seemed the frightening figure of $79 billion. During the Reagan years, however, it ranged from a low of $128 billion in 1982 to a high of $221 billion in 1986; the average for the years 1982-7 was $184 billion. 3 At the same time American corporate debt has grown apace. More worryingly, borrowers spent much of the money not on productive investment but on costly takeover battles. Increasingly the United States has relied on foreigners to fund these massive amounts. Although eschewed in the 1988 presidential election, this problem has been the subject of numerous articles and books; for example, Felix Rohatyn in the New York Review of Books, Peter Peterson's series in The Atlantic, and Day of Reckoning by Benjamin Friedman.

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