National Debt

National Debt: An Overview

What Is National Debt?

National debt is the amount of money a country has borrowed from a lender, resulting in a debt to that lender. Commonly referred to as the national deficit, national debt is essentially the same thing. For example, when the United States borrows money, the United States becomes indebted to their lender, and if the amount of money borrowed isn’t able to be paid back to zero within an agreed upon length of time, the debt grows. The national debt in the United States has grown over the years from billions to trillions of dollars because the country continues to borrow money without the ability of paying it all back at once. The national debt has grown so large because the United States has not been able to pay back their lenders.

How a Country Gets Into National Debt

When a country goes into national debt, it’s because that country’s expenditures have exceeded their income. If a country overly spends in one area, such as construction, military or foreign aid, and they aren’t able to bring in enough income to cover those expenses, that country must then borrow money to cover other expenses, like payment for police work. In the United States, there are normally two types of budgets—one for everyday expenses and one for federal investments. Federal investments are things like the protection and the general infrastructure of the country. It’s common practice for states to spend their money on everyday necessities, and then borrow money for their federal investments.

Is It Possible to Get Out of Debt?

There are many people who believe that the national debt will not reduce in any significant way. Then there are others who believe that getting out of the national debt is very possible. These people are of the opinion that the country should make good investments, such as investments in education, military and roads. People who think the national debt won’t reduce may also believe in good investments, but they don’t want the government to overspend because it may result in debt. The government may then institute higher taxes for citizens in order to pay off its national debt. Some people think that economic growth in a country can help reduce the deficit, which, as an example, can be done by citizens earning steady incomes.

Common Beliefs About National Debt

Some common beliefs about the national debt are that the national debt will only keep growing and growing. Many people believe the national debt will never get smaller. There is often a fear that the country will go so deeply into debt it will eventually become a bankrupt country. But one common belief is that as long as the country contributes to its own growth by making good investments, some of the national debt will be alleviated. One example of a good investment would be spending money on education in order to create a productive member of society. The idea is that this person will contribute to their country by earning an income and paying taxes.