Delivering American University's news and views since 1925. | Tuesday, September 19, 2017

Op-ed: Beware the national debt

The national debt is frightening, Natalie De Vincenzi writes

Op-ed: Beware the national debt

The national debt is on the rise. Each second, the U.S. accumulates another dollar in debt, ticking the debt clock higher and higher.  Each year, legislators allow us to spend more than the revenues we take in, resulting in large federal deficits, according to the Congressional Budget Office. In 1970, the national debt was $371 billion. Now, it is $20 trillion (If you were wondering, that’s twelve zeros).

The national debt is 77% of our gross domestic product. That means the size of our debt is about 77% of the size of our total economy. That's frightening. Even worse, the debt relative to GDP is set to increase to 89% within the next 10 years, and by 2033, the debt will completely exceed our economy. This is dangerous not only to economic growth, but also our stability as a nation.

You might be wondering: “Well, how does this affect me?” I can assure you it affects every American and especially college students. College students are just now going to enter the job market or will within the next few years. Many college students will carry student loans past their college careers and into the real world.

A higher national debt means lower wages and lower incomes. If you are preparing to enter or are part of the workforce, be prepared for wages to drop in the coming years as a result of the national debt. Because of our high debt, the Congressional Budget Office estimated that gross national product per capita, the total value of all goods and services produced by a country divided by the population, will be approximately $4,000 lower by 2046.

Yet, if the budget were to be balanced, Americans would actually see an increase in their income. Gross national product would increase by more than 6 percent in 2040, or a $5,000 increase in income per person in today’s dollars.

Over the next 25 years, workers would see an average increase in income of $45,000. Lower debt translates into higher incomes, which means that as a nation, we become more prosperous. That means more investment in the economy and more consumption. People are able to buy more and our ability to pay back the debt would become easier.

A higher national debt means higher interest rates. Do you plan to ever buy a house, pay off those student loans or maybe even get a car? Well, that may prove to be more difficult with a higher debt. A growing national debt can hike interest rates, which results in higher payments on car loans, mortgages or student loans.

A lower debt means lower interest rates. In fact, if our debt relative to GDP was decreased from the current 77 percent to 65 percent, interest rates would be two-thirds of a point lower, according to the Committee for a Responsible Federal Budget.

A higher national debt means slower economic growth. Rising debt reduces investment and consumption in the economy, which in turn, slows economic growth. CBO projects that by 2046, the economy will be 5 percent smaller because of a high national debt.

Stymied economic growth makes the U.S. as a nation less prosperous. With slower economic growth, it becomes increasingly more difficult to pay back the national debt because slower growth means lower wages, which means less revenues taken in to offset expenditures.

A high national debt can have severe consequences on our economy. But, the question is: Why must the government’s inability to spend wisely affect our futures? As Americans, we need to reinstate fiscal responsibility in our nation and work to lower the debt. The best way for college students to work to lower the debt is to educate themselves and one another about the issue and to elect legislators who will make fiscally responsible decisions.

Natalie De Vincenzi is a recent graduate from American University and is an advocate of fiscal responsibility. She worked as a Federal Affairs Associate for Americans for Tax Reform and recently completed her capstone covering the issue of the national debt.

edpage@theeagleonline.com


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