Each American Is Under A Debt Of $66,465 — What’s Going On Here? Stop listening to ‘Donald Trump’ knowing things are definitely not right with the US economy.
You must read his tweet before diving deep into this important article:
The Economy is about ready to go through the roof. Stock Market ready to break ALL-TIME RECORD. 401k’s incredible. New Jobs Record. Remember all of this when you VOTE. Sleepy Joe wants to quadruple your Taxes. Depression!!! Don’t let it happen! #MAGAPresident Trump
Everyday, President Trump celebrates the astounding recovery of the American economy on Twitter. Due to lack of authentic information, it is natural for the people to believe. However, a little truth saves the nation from going down the road of ignorance that leads to a total collapse and America’s debt disaster is almost here. There might be another reason for you to cast your vote at any cost, with a sane decision — According to estimates released by the Congressional Budget Office —
The US deficit for fiscal year 2020 amounts to $3.13 trillion which is 15.2% of the GDP. The final figures on US debt in 2020 will be released by the Treasury department end of this month.
And it is not even the complete picture. Here is the part that lies beneath the tip of the iceberg and how America got in this debt disaster —
If the estimates by the Congressional Budget Office turn out to be true (which is highly likely), the overall US deficits will surpass the total valuation of its economy ending up at 102% of the GDP. These overall deficits are the sum total of FY 2020 and all the preceding years from where the debts had been piling up.
Fiscal year 2020 has been a rough economic ride for the country, reason being the disparity between the nation’s spending, amounting to $6.55 trillion and its borrowings which are valued at $3.42 trillion.
A Debt Hangover Waits In Hiding For Americans.
The key culprit behind extensive borrowings is the pandemic which started taking shape in America from the onset of spring. Government has spent more than $4 trillion to provide economic support to the worker class and businesses during the lockdown. The story doesn’t end here. Covid-19 pandemic is still a reality and we are still months away from a vaccine.
The deficits of the country are clearly narrating a story where the US recovers from Covid-19 but slips into another pandemic-debt payback.
Would it be wrong to blame President Trump alone for the America’s debt disaster — thats amounting to trillions of dollars in 2020?
However, there is no denying that he too has a huge role to play in the accruing deficits of the country. Therefore, it is important to decide which of the presidential candidates will actually take up the agenda seriously and will be able to draft out extreme measures.
Watch: Mounting budget deficits threaten American cities
The last time US debt surpassed the national economy was in 1946 when federal debts amounted to 106.1% of GDP. This money borrowed during the pandemic is also different because there is not much fiscal return on how the government is spending this money. Majority of American debts taken in 2020 have largely been spent for relief purposes and have little return.
The second quarter dip in the US economy (31.4%) was even bigger than the Great Depression (25.6%).
The only thing that keeps the 2020 recession from becoming the greatest depression ever is its duration.
“There is no set tipping point at which a fiscal crisis becomes likely or imminent, nor is there an identifiable point at which interest costs as a percentage of GDP become unsustainable,” CBO director Phillip Swagel said last month. “But as the debt grows, the risks become greater.”
Americans haven’t been debt free since 185 years.
The total U.S. government debt after the War of 1812 amounted to $115 million. The process of running budget deficits began in 1694 by Hamilton. But the seventh President of the US, Andrew Jackson, was not in the favor of carrying any debt forward voicing his conviction that debts weaken the nation. So, in 1835 Jackson paid off all the debts of the country in less than 6 years of his presidency. He made the disappearance of American debts by cutting down government spending and selling away the federal lands.
However, the country stepped back on the track of deficits and after 1865, the Civil War slid the country under a debt of $2.5 billion. Till 1930, wars led to the creation of huge budget deficits for the U.S.
Watch: Is the $22 trillion national debt a problem?
Deficits actually shifted from the dark light to step into spotlight after the Great Depression when Keynesian model was adopted to recover the economy of the country. The economist provided macroeconomic explanations that proved the importance of deficits to increase demand and overcome recession.
America took Keynesian theory seriously and by the 1940s the country was running huge budget deficits. America ended up creating the greatest deficit ever by spending recklessly on World War II which amounted to 106.1% of its GDP. It began then and the American debts are still accruing with no attention from the policymakers, let alone drafting actual measures.
Total debt of the US government, as per FY 2019 numbers, amounts to $22 trillion.
But to who does America owe debts?
There are two categories in which the debt is held — intragovernmental and public debt.
Intragovernmental debts amount to one-fourth of the entire federal debts. Rest is known as public debt which is owed to governments of other nations and foreign investors. These amount to almost 30% of the debts.
America owes largely debts to the following 5 countries —
USA owes $1.26 trillion in the Treasury to Japan as of April 2020. This amounts to total 18% of the foreign owned US debts. However, before 2103, Japan stood at second place. US owed its largest debt to China.
As of April 2020, debt from China amounts to $1.07 trillion in the American treasury. This amounts to a total of 15.5% of money that the US owes to foreign nations. However, America is reducing its deficits from China and the current amount of debt is the least in the preceding two years.
3. United Kingdom
While China’s debt to the US is trimming down, the UK is on the opposite road. As of April 2020, the U.S. owes $368 billion to the UK which is the highest in the last eight years. This amounts to 6% of total US public debts from foreign countries.
Country with the ninth largest economy in the world has a share of $286 billion in the US treasuries, which is 4% of the foreign debts.
With $300 billion in the U.S. treasury, Ireland holds 4% of the American foreign debts. What strengthens Ireland’s position is the favorable tax policies for American multinationals like Google on foreign returns.