To answer this question, one must look at the impact on the general economy in a macroeconomic sense. The U.S. debt is the total of all outstanding debt owed by the federal government. As of September 2014, the national debt is over $17. Trillion. (1) America's debt is the largest in the world for a single country. It is second only to that of the European Union, which is an economic union that consist of 28 countries. (2) At this point, it is important to define what “debt” is and what types of debt exist.
What Is Debt ?
There are two types of debt, “Public Debt” and “Private Debt”. Public debt is where the government owes to itself while private debt is owed to others. In other words, Public debt can be accumulated by a government agency …show more content…
The rest is owed by the government to itself, and are therefore held as government account securities. The Majority of this is allocated to social security and other monetary and intergovernmental funds. (6) If the overall debt is nearly as much as the United States produces in a whole year, generally would signify to foreign investors that the country might have problems repaying the debts, as the United States has a GDP of 16.8 trillion as of 2013 (7) compared to the debt total of $17 Trillion. …show more content…
The research done by Harvard economist Carmen Reinhart and Kenneth Rogoff in their research analysis entitled “Growth in a time of debt” is the most comprehensive example of this. Reinhart and Rogoff's work is often cited as having a major influence in recent years on public policy and the management of government debt. They claimed that high levels of debt to GDP lead to extended periods of sluggish growth. Specifically, they alleged, the average growth rates for countries with public debt over 90 percent of GDP are approximately one percent lower than they would be otherwise. They also claimed that countries with debt above that level would be diminished roughly 0.1 percent
What Is Debt ?
There are two types of debt, “Public Debt” and “Private Debt”. Public debt is where the government owes to itself while private debt is owed to others. In other words, Public debt can be accumulated by a government agency …show more content…
The rest is owed by the government to itself, and are therefore held as government account securities. The Majority of this is allocated to social security and other monetary and intergovernmental funds. (6) If the overall debt is nearly as much as the United States produces in a whole year, generally would signify to foreign investors that the country might have problems repaying the debts, as the United States has a GDP of 16.8 trillion as of 2013 (7) compared to the debt total of $17 Trillion. …show more content…
The research done by Harvard economist Carmen Reinhart and Kenneth Rogoff in their research analysis entitled “Growth in a time of debt” is the most comprehensive example of this. Reinhart and Rogoff's work is often cited as having a major influence in recent years on public policy and the management of government debt. They claimed that high levels of debt to GDP lead to extended periods of sluggish growth. Specifically, they alleged, the average growth rates for countries with public debt over 90 percent of GDP are approximately one percent lower than they would be otherwise. They also claimed that countries with debt above that level would be diminished roughly 0.1 percent