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America’s $32 trillion debt mountain may not be as bad as it seems.
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According to experts, there are some misconceptions about the national debt.
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Still, at current spending levels, debt problems are likely in the future, economists say.
America’s huge mountain of debt It may seem like a serious problem for the country, but experts say there are some common misconceptions about what the growing debt pile means.
The national debt has surpassed $32 trillion for the first time since years of profligate spending following the pandemic. And the debt burden could get even higher – it could. 50 trillion dollars in the next 10 yearsAccording to the forecast Congressional Budget Office.
It could cause trouble for the US, especially when it comes to rising interest rates. But experts say there are major misconceptions floating around America’s debt crisis. This makes the country’s debt burden more serious than it actually is.
There are five misconceptions about the nation’s debt burden.
1. America must pay 32 trillion dollars
Technically, the US has to pay interest on its debt, and the principal on government bond maturities. In fact, it is unusual for countries to pay off the debt in full after accumulating a large balance Nobel economist Paul Krugman. This is the situation in which Great Britain still holds debts incurred during the Napoleonic Wars.
They cost America. Only 395 billion dollars to pay the debt Last year as the Office of Management and Budget. That’s it. About 1% of last year’s GDP.
Still, debt service costs are likely to rise sharply in the coming years, economists say. It could cost the government $663 billion this year to service the debt, according to CBO estimates $7.6 trillion in government bonds is about to mature. In the next twelve months. That’s about a third of the total balance, or a quarter of America’s gross domestic product.
2. Current debt levels are too high.
Public debt balance should be properly assessed in relation to GDP. of America’s debt-to-GDP ratio hovers around 97% Last year, below the 100% key threshold.
“[$32 trillion is] Meaningless. According to Mark Zandi, chief economist of Moody’s Analytics, it is in the context of GDP, the resources available to make good on the interest on the principal payments on the debt. But these big numbers fail to recognize that there are some very big numbers backing that debt,” he added.
3. Debt is bad for the US economy.
Debt helps the government carry out vital functions. It will help fund important investments, such as climate change initiatives and building new infrastructure, Zandi said.
“Using debt on the part of the government is a very appropriate and desirable way to finance many of them,” he said. “People are worried about the government borrowing anything, and that’s wrong. We need to borrow money because of the long-term investments the government is making in our economy.”
4. To prevent a crisis, the US must pay off the debt quickly
At current levels of spending, however, the United States is not in immediate danger of a debt crisis.
The U.S. could ease concerns among bond market investors by controlling spending or reviving economic growth relative to GDP and current interest rates. And by some accounts, the The US is now growing too fast to get into a debt crisis.With the forecast of the Atlanta Federation 5% GDP growth During the third quarter.
5. America’s debt problem is unique.
Rising debt levels are a global issue. China’s debt crisis is now eating up the country’s property sector. Middle Eastern countries are also flirting with debt crisis.And World debt balance According to the economists of the International Monetary Fund, it is likely to change upwards in the coming years.
“This is a broader sovereign debt problem that’s starting to develop. So I think this is going to be a problem down the road unless policymakers change policy or the economy does much better than expected,” he said.
Read the original article on Business Insider
