Why is America in debt?

Question

Why is the USA, the country considered to be a booming economy, in debt? In debt to who? If they have such good economy, why are they in debt anyway? Is it because of the recent global financial crisis I keep hearing about? Even before that I read somewhere that America is always in a budget deficit. Nothing seems to be done to fix it.

Answer 1

America is in debt because of a budget deficit. The term budget deficit occurs when government expenditure exceeds that of the revenue. The budget deficit is perfectly normal and happens in many countries all around the world. America is receiving less money (usually in the form of taxes) and needing more money to spend for the country, so in order to fund further spending, USA have to take up loans, usually from the banks. So the country is in debt, although it’s not always a bad thing. If America is spending more on building infrastructure to expand the economy and make more jobs available in the future, then the debt is justified. They are expecting higher returns in the future to cover what was spent in the past. The problem arises when the money is not spent on expanding or the country isn’t receiving any returns. Then the deficit will grows in need of covering previous years’ spending and more loan is needed to keep the economy competitive.

Answer 2

America spends so much on the country without getting the same amount of money in. The top 3 spendings, consisting of healthcare programs, social security programs (pensions for the retiree at the poverty line) and their exorbitant defense budget expenses. The rest is spent on maintaining roads, transportation, education, etc. The top 3 pose the major problem as being an item of only spending with no expected future returns, it’s an investment with no benefit at all. The ones that will reduce the debt in future, i.e. education and infrastructure, aren’t spent as much on. More is spent on prisoners than high school students and high school graduates are the one that are more likely to improve the economy in the future. So US ends up in a debt because their primary spending is on ensuring that country is running as it currently should, not as much on the future.

Comments

I don’t think not spending money on the right investment is a great factor when we discussing over why is America in debt…

Answer 3

The US is in debt since the source of income for the country has not been growing. Household income taxes are the main source of income for US, however, taxes have not been increasing at the same rate as the amount of spending and the economy of the country. Employment has been looking bleak in the past few years, although it is improving. With the recent 2007-08 Global Financial Crisis putting the country at a depression once again, US is still recovering from the damage. On the plus side, the current Obama administration have effectively almost doubled the amount of jobs available and lower the unemployment rate to an all-time low since his office on 2009.

Another source of income would be corporate income taxes. The crisis has not been kind to them either and many laying-off workers in order to not go bankrupt. As such, they aren’t contributing to the income stream as much as they used to and reducing the amount of household tax US received as well. The economy lately led to more spending and less income, causing the US to be in debt.