On the Sixth Avenue in Manhattan, there is a national debt clock that shows the amount of United States national debt. The clock was first installed in 1989, and can show up to ten trillion dollars. It ran out of digits in October 2008 when the sum of debt exceeded the amount. A new clock with two extra digits is going to be installed (Izzo 2 ).
We hear about the debt almost every day: news talks about it, politicians argue about it, even President Obama gives speeches on it. So what is the significance behind it? In this article I am going to explain briefly what the national debt is, how big it is, and what it has to do with us.
The United States national debt can be divided into two major parts: public debt and intra-governmental holdings.
Public debt, which comes from securities and bonds issued by the United States Treasury, is responsible for over 60 percent of the debt (“Debt Position and Activity Report” 1). These debts are being held by the public inside and outside the US. Over 25 percent of the debts are held by foreign governments, in which China and Japan accounts for almost half of the sum (“Treasury Bulletin: September 2009” 60).
Intra-governmental holdings are debts owed to government accounts. A major part of this debt is owed to social securities account, which is going to be paid when baby boomers retire over the next 20 years.
All but four countries in the world has external debt (“Country Comparison: Debt External”). Having a debt is almost as common as having a mortgage. Since its establishment, The United States has always been in debt (“Historical Debt Outstanding – Annual”). The US national debt has had five sharp increases previously in its history. The reasons include civil car and the two World Wars (The committee on Public Debt Policy 3).
The reason for all the recently attention is because the US national debt is the leading one in the world and is still increasing rapidly. In 2009 the debt was amounted to about $12 trillion , or 83.4 percent of the country’s GDP (“Budget of the United States Government: Historical Tables Fiscal Year 2011” table 7.1). Since 2003, the debt has been increasing by more than $500 billion annually. The increase in 2009 was $1.9 trillion. According to the Congressional Budgeting Office, this debt will keep increasing at least for the next decade (“The Budget and Economic Outlook : Fiscal Years 2010 to 2020” 21).
Why do countries keep loaning to the US? Despite of the fact that US is in debt, it is still one of the biggest customers in imports. Countries such as China and Japan are actually loaning US money to buy their exports. This situation is like a casino is loaning you money to play blackjacks; the house makes more money as long as you can pay back. The United States has a strong economy to support itself for good credits and therefore can keep on getting more loans.
As with most loans, the US national debt comes with an interest. Interest paid for the debt in 2009 is...