debt

The National Debt: What’s Behind All Those Zeros?

When U.S. president Donald Trump was running for office, he made lots of promises – including a big one that he would eliminate the national debt. This week Mick Mulvaney, the president’s budget director, commented on Trump’s campaign declaration during a conversation with CNBC’s John Harwood, saying, “It’s fairly safe to assume that was hyperbole. I’m not going to be able to pay off $20 trillion worth of debt in four years.”

Empty campaign promises, especially those involving money, are not too surprising. The real shocker in Mulvaney’s comment involves all those zeros. The U.S. has a $20 trillion national debt, prompting many in recent years to characterize America’s fiscal situation as a true “debt crisis.”

What’s All the Fuss About?

The national debt is the amount of money owed by the federal government. The U.S. federal government is running a deficit (more liabilities than assets), annually spending more money than the revenues it takes in. To make up for this, the U.S. borrows money to pay its bills, adding to the national debt. And when you borrow money, you must pay interest on that loan. All of this is leading to what many believe are serious long-term fiscal and economic challenges for the country, which will fall squarely on the shoulders of younger generations, like millennials. Today’s students are tomorrow’s workers and taxpayers. For one, they will face the higher tax burdens needed to fund the government and its interest obligations.

“As a student who is planning on graduating in the next two years, I want to go out to the work force in a stable economy,” says Fiorella Riccobono, a sophomore at Florida State University who is on a personal mission to raise awareness about the national debt and help to find solutions. “The national debt has a direct impact on our personal lives. It influences the way the federal budget is crafted. In just over a decade, interest costs will be the third largest category of the federal budget. The federal government now spends more on interest payments than it has typically spent each year on education. Research proves that developed economies, much like the United States, are at risk of dangerous and extended reductions in economic growth when public debt reaches levels of 90% of GDP. The congressional budget office projects that under current law, federal debt will climb to 141% of GDP within 30 years, which is much greater than our country’s entire economic output.”

Since government debt increases as a result of government spending, one of the ways to influence change related to the national debt is to think of new ways to craft the public policy that impacts government spending – around issues like health care, services for the homeless, education, and the like. Riccobono, a finance and economics major, is a member of Up to Us, a non-partisan program that empowers students to educate their peers on long-term national debt and how it could affect their economic opportunities. Along with a team of four other Florida State students, she competed in this year’s Up to Us campus competition, and is now among the top 20 finalists. To qualify for the top 20, Riccobono’s team planned and executed activities on campus to engage and educate their peers about the national debt.

The Florida State team advocates for solutions involving social entrepreneurship as a way to decrease dependence on government funds. The group held an event for more than 100 students to debate current issues that influence the federal budget, brainstorm solutions to the national debt, and hear from local social entrepreneurs like Unhoused Humanity, an online funding platform that connects donors with homeless men, women and children; and The Sharing Tree, a reusable resource center that collects and redistributes reusable materials to the community. “Students at our event were blurring the lines of the traditional sectors to create innovative change. It was combining the practices of the public sector [government], private sector [businesses], and nonprofits, to create systemic change that the country definitely needs.”

Thinking about How Our Communities Work

The bottom line is that if a system isn’t working – for instance, national debt continues to pile up — creative solutions can help drive change. Since students may well inherit these economic challenges, they need to be aware that they exist and even start to problem-solve for a more fiscally sound future.

“Citizens assume it is up to the federal government to create policy changes that will address these issues,” notes Riccobono. “However, people underestimate their influence and the power of the other sectors. It isn’t only up to the public sector, it truly is up to us. Why do we turn to our governments to solve some of society’s biggest problems? Combining the infrastructure of all of the sectors is the key to solving massive problems that range from our country’s national debt to climate change and access to clean water. How can students combat the national debt when they are one student in a crowd of millions? By starting local, by using local governments, local nonprofits and local businesses to modify the way in which their communities work – and by getting involved with local citizens to create innovative avenues to change that work in their communities. If students can change the budget in their local communities, maybe their impact will influence federal spending.”

And what of those critics who say that America’s national debt is actually beneficial and that we should have even more? Issuing debt is a way to pay for useful things, like building new roads and bridges. In fact, many economists believe that some government debt is necessary. Riccobono and her Up to Us compatriots aren’t buying it. “Many argue that there is nothing scary about the rising national debt and that the debt crisis is just a tool used to instill fear in Americans. While I understand that some debt, while properly used, can safely finance private and government investments to generate productive capital to support economic growth, we have crossed the threshold of safe debt,” says Riccobono. “We need to create plans that have sustainable trajectory and do not create government dependency.”

Conversation Starters

What is the national debt? Do you see it as a threat to your future? Why or why not?

What does Fiorella Riccobono mean when she says, "People underestimate their influence and the power of the other sectors. It isn’t only up to the public sector, it truly is up to us."?

Have you heard the expression "Think globally, act locally?" What does it mean and how does it fit into this discussion around the national debt?

10 thoughts on “The National Debt: What’s Behind All Those Zeros?

  1. I think the national debt is a problem because it keeps rising and the United States is not paying it off. I think we should cut unnecessary spending on programs and projects and we could save millions or even billions and slowly pay off our debt instead of adding to it. Also this article said we are 20 trillion in debt holy cow is that a lot we need to work towards lowering that and stop raising it. We need to find a way to make all the government programs more affordable and and get more people higher paying jobs or even jobs to cut some of the programs like food stamps they probably cost a fortune and the government spends a lot on that. So the U.S. needs to start to find ways to lower it and quickly because it is out of hand.

  2. Fiorella means that the people don’t truly understand that they have the ability to influence other sectors too. If the people make a big deal about a certain thing like the amount of debt the government is in. It will influence others to find a way to fix the problem and lower the national debt. It is up to the people if they want to cause change.

  3. National debt is definitely a large problem in the US right now, and perhaps one of the biggest. It’s pretty scary if you think about it, but I adore to side with Up to Us. We can’t keep our debt sky high. At least lower it a substantial amount before feeling that we could use it for beneficial reasons. It really shouldn’t be beneficial at all, but there’s a side that thinks so that needs persuading.

  4. After reading this it opens your mind and for you to realize that the national debt is one of the most important and most difficult issue to solve. Without cutting defense spending and without cutting medicare and medicaid the national debt will never be paid off. This can cause long term effects on us like Fiorella Riccobono stated from Florida State. The people in government might not care because they are not the ones who will be paying off it will be us the millennials. I think we should take a serious look at this crisis and stop borrowing money so much.

  5. National debt is a key issue that political leaders seem to be focusing on in today’s society. Sadly, their attention in this area is misplaced. That is because debt will naturally exist as long as money is present in this society. Fractional reserve banking, which is how the banks today operate, essentially keeps 10% of money deposited in its reserves, while lending and investing the rest of the 90%. This puts more money in the market, and this fractional reserve system basically creates money out of nothing. $1000 has 10% kept in the bank’s safe, while the $900 is lent out. Thus, there is now $1900 in the market. This process loops over and over again and more money is created. Statistics show that 97% of all money in circulation today is created by banks, not the government. As the money did not previously exist, it is debt that is being created by the banks. Also, all money is loaned out by either the government or banks, so the money we have today can be classified as debt. Our current national debt crisis proves this point. Standing at $20 trillion and increasing, it has been almost two centuries since America was last debt-free. The last time the national debt was brought down to $0 was in 1835 under President Andrew Jackson. During this time, President Jackson effectively “killed off” the central bank and successfully repaid the $58 million of national debt he received upon entering office within 6 years. Killing off the central bank through his infamous “Bank War” may have stopped the creation of debt in the country, hence, allowing the country’s output to catch up to the federal debt level. Although this tactic lasted for only a year, it goes to show today’s misplaced attention on creating surplus instead of other issues. Nonetheless, money is a crucial element in today’s society and banks cannot be erased like they were under President Jackson’s presidency. Thus, like the economists referred in the article states, the national debt is necessary. I am simply wondering what effects the large figure of -$2000000000000 will have on our society. I do not have substantial knowledge in this area and cannot assess if it shall be a threat, but I feel that not much can be done by citizens to prevent the rise of our national debt.

    – Michael Chan

  6. I think this is a really great article as it successfully addresses some of the most pressing issues behind America’s national debt. Not only does it really hammer away at the fundamental problems behind our enormously large national debt, but it also provides guidance as to how we, as a nation, can start to solve this gigantic problem.

    First, I am glad that the article highlights the serious nature of this issue because I believe that one of the major reasons our debt continues to skyrocket at this rapid pace is a lack of awareness and concern about the issue. Yes, I agree some debt can be good. In fact, most economists will agree that having a budget deficit may be necessary to maintain the economy during downturns and recessions. Keynesian economists will swear by their lives that the government must increase its spending and/or reduce taxes (and thus go into debt) to shift the aggregate demand curve to the right and return the economy to equilibrium. So, some level of debt is certainly acceptable and maybe even necessary. However, at $20 trillion, America’s current national debt level is just too high.

    As the article states, several estimates predict the national debt to rise above 100% of our GDP quite soon. That means our government will be owing even more money than the output of our nation. That is a truly frightening prospect. Not only will future generations have to pay off that monstrous debt, but we will also have to deal with all the interest payments. As the article states, our government, as of now, spends more money paying interest on the debt than it spends on education. Mind-blowing! If our government keeps borrowing more and more, we will continue sacrificing our education and other things just to pay off the debt and the associated interest.

    If you are at least convinced that national debt is a problem, then you will be terrified to know that it is just going to continue to grow and grow unless we people make some concerted efforts to create change. Most politicians only care about getting elected to office and staying in office. Therefore, they never campaign on and implement policies that reduce spending and increase taxes (i.e. policies that reduce the debt) as they are very unpopular. Instead, they always try to cut taxes and increase spending to please voters. However, those policies invariably result in budget deficit, and thus an increase in debt. Moreover, the ideologies of both the mainstream parties lead to debt. Republicans’ focus on cutting taxes and increasing military spending tend to raise the debt while the Democrats’ focus on government spending for healthcare, education, etc. also lead to a rise in national debt.

    In order to truly grasp the difficulty in decreasing the national debt, I did some research and found a budget / debt simulation tool (http://www.crfb.org/debtfixer/) developed by the “Committee for a Responsible Federal Budget”. After running several simulations, I found out that even with lots of sacrifices and choosing policies that I do not agree with, I still found it extremely difficult and almost impossible to lower the debt to a safe level.

    Essentially, what the article and all the research and facts that I have indicated above tell us is that we shouldn’t depend entirely on the government to cut our national debt – it simply isn’t a plausible solution. Instead, as the article so wonderfully suggests, we must fundamentally change the system. We, the people of this great nation, must take it into our own hands and start solving the debt problem. We need to demand that our politicians take the “right actions” and not the popular actions and implement the key solutions suggested in the article. We must act and act now. This is a problem that can be solved!

  7. I agree that the US is spending way more than what they have and it needs to stop. If it is not prevented than we will end up in a financial crisis and that’s not good for our future economic position. I don’t think that we should punish the younger generations by increasing taxes because of our governments need to spend more than we have or make.

  8. National​ ​debt​ ​is​ ​a​ ​big​ ​threat​ ​to​ ​not​ ​just​ ​my​ ​future,​ ​but​ ​to​ ​the​ ​whole​ ​United
    States.​ ​If​ ​the​ ​government​ ​does​ ​not​ ​stop​ ​spending​ ​millions​ ​on​ ​unuseful​ ​organizations,​ ​this
    country’s’​ ​economy​ ​is​ ​doomed.​ ​The​ ​expression​ ​“think​ ​globally,​ ​act​ ​locally”​ ​means​ ​that​ ​in​ ​order​ ​to
    fix​ ​something​ ​globally,​ ​you​ ​must​ ​start​ ​locally.​ ​Examples​ ​are​ ​local​ ​government​ ​or​ ​organizations
    that​ ​could​ ​help​ ​fix​ ​the​ ​problem.​ ​Fiorella​ ​was​ ​saying​ ​that​ ​it​ ​is​ ​the​ ​people​ ​that​ ​help​ ​the​ ​government
    fix​ ​its​ ​problems.​ ​The​ ​government​ ​cannot​ ​fix​ ​things​ ​just​ ​by​ ​itself.​ ​It​ ​needs​ ​the​ ​support​ ​of​ ​its
    people.​ ​What​ ​the​ ​government​ ​should​ ​to​ ​to​ ​at​ ​least​ ​try​ ​to​ ​fix​ ​our​ ​national​ ​debt​ ​is​ ​to​ ​cut​ ​budgets​ ​on
    projects​ ​or​ ​corporations​ ​that​ ​are​ ​not​ ​beneficial​ ​to​ ​the​ ​United​ ​States.

  9. I read the article “The national debt: What’s behind all of those zeros?” It talks about how Donald Trump wanted to eliminate the nationaL debt. Students from different schools were explaining how that would be impossible to do. Trump won’t be able to pay off $20 trillion worth of debt in four years. I am reflecting to this article because not only did our president make a promise that he won’t be able to keep. We are still in debt because we buy things when we don’t have the money for it.Students need to take personal finance class so they know how to handle money and so that our generation won’t go into debt.

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