SUMMARY
- U.S. national debt reaches a staggering $33 trillion, fueled by yearly deficits since 2001.
- The pandemic led to an 89% increase in debt, shifting focus back to economic implications.
- Experts highlight the delicate balance between good debt, bad debt, and the nation's debt-to-GDP ratio.
The U.S. finds itself wading knee-deep in a whopping $33 trillion national debt. To give a bit of perspective, Uncle Sam has been splurging more than he earns every year since 2001, leading to this staggering amount. Kris Mitchener, a wise economics professor at the Leavey School of Business, reminds us that borrowing isn't always a bad thing – it’s often a go-to during emergencies, a preferred method over taxing the already-burdened public.
Interestingly, the debt took a skyward leap of 89% at the onset of the pandemic. Back then, the collective sentiment among top-tier economists was, "This isn't the year to fret about the debt." But as we emerge from the pandemic's most severe impacts, it's time to reevaluate the swelling economic elephant in the room. William Gale from the Brookings Institution sagely remarks, there’s “good debt” and “bad debt,” while Michael Peterson of the Peter G. Peterson Foundation wonders if we’re using the debt umbrella for both sunny and stormy days.
But how do we measure this colossal debt's severity? One popular metric is the debt-to-GDP ratio. Alarm bells start ringing when you realize the U.S. public debt is hovering close to 100%. According to the Committee for Economic Development of the Conference Board, a more fitting ratio for a country of America's stature should be around 70%. Lori Esposito-Murray emphasizes the delicate dance between borrowing for growth and ensuring stability.
Now, as interest rates tick upwards, servicing this mammoth debt gets trickier. The Federal Reserve, since March 2022, has been trying to put the brakes on an overheated economy by hiking rates. But, as Professor Stephanie Kelton from Stony Brook University points out, this very act could be a boon in disguise for bondholders, gifting them a chunky interest windfall.
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