As the U.S. debt continues to increase, the country cannot continue to ignore unchecked federal spending and increasing student debt. According to Just Facts, government debt alone is equal to 105% of U.S. GDP and “617% of annual federal revenues.” By 2050, U.S. debt will likely reach 250% of gross domestic product. So, as the debt figure quickly approaches $22 trillion, government officials and economic policy advisers must find a solution.
The Federal Reserve and Interest Rates
One direct action that can be attributed to the exponentially increasing debt figure is a growing U.S. spending deficit of over $1 trillion last year. It is important to note that the government pays interest on this debt. Fed Chairman Jerome Powell’s raising of interest rates in this past 2018 did not help the situation. The first step to fixing the growing crisis is resolving federal spending. The federal budget must be looked over, and cuts must be made.
The Federal Reserve’s recent choice to maintain a neutral interest rate policy should hopefully help to calm this crisis. However, we are continuing to sit on a growing issue that cannot be ignored. If you want some perspective on federal debts alone, take a look at the United States debt clock here: http://www.usdebtclock.org/.
Student Loans and Mortgage Debt
U.S. student loans are also at an all time high, with college graduates increasingly unable to pay off student debt. The Federal Reserve has just reported that 400,000 U.S. families have been unable to afford homes due to crippling student debt. The debt is quite a significant amount, $37,172 for the average college graduate when the average annual salary for a college graduate is only $50,516.
The largest outstanding debt for the American consumer is mortgage debt, which can quickly turn into a large problem as real estate prices continue to fall and the real estate market slows down. Mortgage debt alone is in the tens of trillions for the American public. Thus, it is now increasingly difficult to sell a home for a profit, and mortgages cannot be refinanced. A vicious debt cycle occurs, as home prices continue to fall and the American consumer suffers.
Preserving Economic Health
Although the rising stock market and healthy corporate earnings may tell a different story, rising debt remains a possible disaster. The United States’ economy is doing well right now – but if true economic health is to be preserved, the government must fix its spending and ensure that the public can be free from any overbearing burdens from student debt or mortgage debt.
It is imperative that Capitol Hill begins resolving this crisis. With politicians involved in partisan policies that promise too much to the American public, the government debt has to absorb the damage from detrimental, unsustainable fiscal policy. Between unsustainable tax cuts, as well as unaffordable entitlement programs, United States politicians must find a bipartisan solution to this crisis.
About the author
I'm a Stanford student passionate about financial literacy. I cover topics from personal finance to global economic news.
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