National Debt: –Macroeconomic Perspective Essay

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National Debt: –Macroeconomic Perspective

For years, the issue of the Government's national debt (and its payment) has been a major political issue. As of July 1st, 2004 the Federal Debt has reached an all time high of 7.252 trillion dollars (that means that each person in the United States is be over 24,000 dollars in debt). According to economists, the debt will increase by 1.6 billion dollars per day! In economical terms, a debt occurs when an individual or group borrows money and is charged interest on that loan. The Federal Government through deficits (spending more than what is collected in taxes) in budget spending created this debt of over seven trillion dollars. In the Revised Circular Flow Model in the appendix, we can see
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The two major funds represented within this area are Medicare and Social Security (there are several others included as well). This presents a very disturbing fact for several reasons. First, the money in these trusts was to only be spent for particular purposes. For example, the funds in social security should only be used for those who need social security. It should also be known that the limitations on the usage of these funds were protected by law (preventing the government from spending the funds differently). However, Congress reversed its actions soon after by allowing the federal government to use the funds on loan. This becomes a great problem when people go to legally use these trusts, for the government has taken all the money from them. Therefore, the government must then borrow more money from other areas (namely the public) to pay for the money that they have already borrowed; exponentially increasing the debt and the interest service (See Borrowing Chart in Appendix). This is major problem for the Social Security Trust, which has 1.59 trillion dollars worth the IOU's in it. As stated above, in order to pay those who need money from the borrowed trusts as well as to provide cash for other expenditures, the government must look to the public for funds. This form of borrowing has many different types. The main form of government borrowing is in U.S. Treasury Securities. These are formal "IOU's" that the government issues with the
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