Have you ever watched the US National Debt Clock ticking higher every second and wondered what happens when it hits a new high? It changes with the blink of the eye, but have you thought about what it really means for you?
The truth is that the rising US national debt clock affects you more than just changing numbers on the screen. It impacts everything from your taxes to job security, even the government policies made for US citizens.
The US Government is trying to figure out how to pay all the national debt back; until then, let us learn about the impact of record debt levels, policy responses to rising debt, economic risks of exceeding debt limits, and how to personally prepare for record debt levels.
Understanding the Impact of Record Debt Levels
Record debt levels are simply the amount of money the USA has borrowed and needs to return. The USA borrows money by issuing bonds, & right now, the level of borrowed money is quite high, which means the USA needs to return money to different government bodies and countries. This economic pressure has its own impacts.
Interest Payments
The interest payment system of the USA as a nation is the same as that of US citizens. We pay compound interest, which means it gets compounded and reaches a higher level with passing time. As the US National Debt clock is in trillions of dollars, the US pays approximately $80 billion in interest payments. As interest payments take so much of the US governmentâs spending, thereâs little left to invest in essential matters like health care and education.
Economy Growth
As the government spends so much of the money on interest payments, it has little left for investments in infrastructure and business. When thereâs no investment in these fields, thereâs no long-term earnings for the US government. This leads to slow economic growth. It even hampers the economic recovery process for the USA.
Future Taxes
So, how will the government earn if it has nothing to invest and no long-term earnings? One way is high taxes, and another is low public services. Chances are, the U.S. government will implement high taxes on every good and service it provides so that it can increase its GDP. If worse comes to worst, the US government might need to reduce the number of public services to reduce the governmentâs spending.
Investorâs Confidence
When the nation has high debt, investors are worried about high interest rates, inflation, and financial crises. They are less willing to invest in business and projects, be they private or public. When thereâs low investment, thereâs less way of income.
Policy Responses to Rising Debt
So, it is a plain fact that the USA owns a huge amount of debt. So, what is the government doing to respond to these rising debts? Policy makers of the USA- the president, congress, and experts have drawn some policies to deal with these issues and try to keep the US national debt in line.
Government Spending Cut
The first thing the US government can do is cut government spending. The USA spends huge amounts of money on the military, social security, and government employee salaries. If they could lessen the government spending and keep the working intact, USA government could save some money for itself.
Raising Taxes
Another way to earn more revenue for the government is to raise taxes on individuals and businesses. If only the USA increases the taxes on corporations and businesses, then they can earn more money without having to borrow much money with treasury bonds.
Increasing the Debt Ceiling
The debt ceiling is the amount of money the US government can owe. To tackle rising debt, which means thereâs less to invest, the government could simply raise the debt ceiling and borrow some more money for investments. But this means more national debt.
Social Programs Reform
Some of the USA social programs, like Medicare and Social Security, are very costly. The government could change the policies of these programs, like having a longer employment duration before providing the services, so it could save itself some money.
Monetary Policies
The US Central Bank could reduce the interest rates so that more people could borrow money and invest in business and projects, which could mean more long-term investments and, ultimately, greater revenue.
Economic Risks of Exceeding Debt Limits
As you might know, there are many risks when you spend more than your credit limit. It is just the same for the US government, except that they have a budget instead of spending limits. As the US national debt clock keeps rising, there are some consequences that both the US government and citizens need to be ready for.
Higher Borrowing Costs
Have you noticed that when you spend more than your credit limit, the interest rate increases; it is the same for the US government, too. If the US government borrows more money than its limit, the interest on borrowing money increases. With the spike in interest rates, it will be difficult for the government to invest, and a lot of revenue will be spent on interest payments.
Economic Instability
The USA has lots of national debt, and if this keeps increasing, chances are the USA will face an economic crisis. The amount of national debt is too high, and so is the debt-to-GDP ratio. To improve the situation, the government could cut down the government services, which could lead to unstable economic conditions in the USA.
Inflation
So, the USA can print its own currency, and chances are, it could print more currency in the near future to cope with the national debt. It may seem like a simple solution to the issue of raising the US national debt clock, but this could lead to inflation. With lots of currency, the value of currency will decrease, and the prices of goods and services will increase.
Personally Preparing for Record Debt Levels
You may wonder if thereâs something you could do to deal with the record debt level. There are a few tricks that could be more for you in the near future.
Save More Money
The basic idea is to save more. As the US national debt clock keeps on hitting new highs, the chances of inflation and economic instability are high, so a simple thing you can do is save so that you donât strain your budget. You can open an emergency fund where you can save like 6 months' worth of your expenses. You could even set up automatic savings so you don't forget to save.
Pay Your Debt
With the increasing US national debt clock, chances are the US government will increase the interest rate to generate more revenue. This means you have to have more interest in the future, so it's better if you pay your debt now. You should pay the debts that already have high interest rates first. You could use the debt snowball method (paying the smallest debts first) or the debt avalanche method (paying the largest debts first), whichever suits you.
Invest in Diverse Things
As the US national debt clock increases, chances are US assets will be volatile, so it's better if you look into other things to invest in. You should look into International Mutual Funds or Exchange-Traded Funds. Even gold, silver, and real estate act as a hedge against inflation.
Budget Your Income
With the possible chances of inflation, it's better if you start budgeting your income. Try to keep track of your income and expenses. Find out about the extra spending you do that could be avoided. Better to prioritize basic needs before luxury items.
Consider Income Growth
The chances of economic instability are high, so it's better if you can earn more to keep up with the rising prices. You wouldnât want to fall behind financially, would you? Consider looking for a high-paying job or asking for a pay raise. You could even explore freelancing or try out side gigs. We know it's easy to say than do, but thereâs nothing wrong with trying, is there?
Stay Financially Informed
To make better financial decisions, you need to be informed about what's changing in finance. Knowing whatâs happening with the US national debt clock could help you make decisions about upcoming interest rates and inflation. It is better to be informed about whatâs changing than to be hit by a personal economic crisis.
As the US National Debt Clock keeps on hitting new records, it is important to be aware of its effect on the US economy. We know it can be overwhelming to keep track of these changing numbers, but we hope you can understand the sensitivity of the situation. Better to be ready for informed discussions about fiscal responsibility and economic policies.
FAQs
How much more debt can the US handle?
The amount of debt the US can handle isnât fixed. The US can handle debt until the economy is growing faster than the debt.
Why is the US National Debt increasing every second?
The US national debt is increasing every second because the US government's spending is more than its tax revenue.
How does the US Debt Clock affect the economy?
The US debt clock affects the economy as it represents the financial situation of the USA, which ultimately affects investorsâ confidence & credit scores.
What does the USA Debt Clock mean for my taxes?
The growing USA Debt Clock means higher tax rates & longer interest payments for your taxes.
How will the US Debt Clock impact future generations?
The US debt will impact future generations with reduced government services and global competition.
