The U.S. Debt and How It Got so Big Essay

749 Words Jul 20th, 2016 3 Pages
Week Three Article Review – The U.S. Debt and How It Got So Big Week three’s article review focuses on an article written by Kimberly Amadeo, an U.S. economy expert. This article explains the public debt of the United States; who owns the debt, how the debt is financed, three components that increase the debt, and what effect debt has on the economy.
The U.S. debt is the total sum of all outstanding debt owed by the Federal Government, it is the largest in the world exceeding $18 trillion, and is tracked using a national debt clock. Nearly two-thirds of the public debt is owed to the people, businesses and foreign governments, the rest is owed by the government to itself, and is held as Government Account securities. Public debt is
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China and Japan are large purchasers of Treasury bills and maintain large holdings of Treasuries to keep their currencies low relative to the dollar. During the recession, foreign countries increased their holdings of Treasury Bonds as a safe haven, which kept U.S. interest rates low. These holdings went from 13% in 1988 to 31% in 2011.
Most of the U.S. debt is owed to Social Security and other trust funds, which were running surpluses. Social Security trust is “a federal fund that saves excessive Social Security tax revenues received in one year to meet Social Security benefit obligations that exceed Social Security tax revenues in some subsequent year” (McConnell, Brue, Flynn’s, Macroeconomics: Brief Edition, 2e, February 7, 2012, p198). These securities are a promise to repay these funds when Baby Boomers retire over the next 20 years. It took in more revenue through payroll taxes leveraged on Baby Boomers than it needed The U.S. has been able to borrow from the Social Security Trust Fund, this money should have been invested to be available when the Boomers retire, but instead was used by the government to finance increased deficit spending. This helped keep Treasury bond interest rates low, allowing more debt financing.
This article correlates to our class discussion on the basis of overwhelming public debt.

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