Debts may be incurred between and among individuals, between entities and individual, government and individual, government with companies, or government with other governments. The national debt history of the U.S. has started decades ago. And through the time, just as other governments experience it, these debts are increasing. The public debt of the U.S. involves money which the federal government borrowed through the issuance of securities by other agencies of the government as well as its Treasury. Generally, the national debt of the US is comprised of two parts.
First are the debts which the public held. They consist of securities from investors from without the federal government, from the Federal Reserve System, foreign states, and even local governments. The second are the intragovernmental debts like the Social Security Trust Fund. National debt history has long been an issue. There are questions posed on why do the government continues to incur in debts despite its overwhelming economic growth. The public debt varies, it may increase or decrease depending on the yearly unified budget surplus or deficit of the government. This so called government budget deficit or surplus is the difference between that which the federal government received and its expenditures, exclusive of intragovernmental transfers. The deficit or shortage is largely manifested in the form of cash than by accrual method.
Over the years, national debt has been increasing. This is a fact which is not at all surprising considering all that the governments incurred in expenses. The debt of the United States is increasing for about US$500 billion by each fiscal year. Just recently, the national debt reached US$14.71 trillion. From this gross debt, US$10.07 trillion is held by public; US$ 4.64 trillion forms part of intragovernmental holdings.
Destructive rivalry between Democrats and Republicans
The rivalry of the Democrats and the Republicans in the United States government is not confined with politics. They likewise debate on the national debt history of the United Stated. On one hand, the Republicans argued that the US could have incurred lesser debts if there be smaller federal governments and imposing lower taxes. Conversely, the Democrats opt for larger federal governments and higher tax rates, hence higher collection. Indeed, the Republicans has a point, the larger federals there is, the more spending is necessary. As for taxes, more tax dues results to higher public holdings. Just this August 02, 2011, President Obama signed the Budget Control Act of 2011, allegedly for purposes of averting the possibility of financial dilemma. The US Government is taking all possible measures through laws or policy to lessen the rapid increase of the national debt.
The national debt history has long started, as early as 1791. The process of incurring debts by the United States began during the American revolutionary war which then amounted to over US$75 million. From then, the federal government had continuously incurred in debts. Huge upsurge in the national debt likewise took place as an after effect of the Civil War. From the aforesaid amount, the national debt had increased to a billion in the year 1863, and thereafter increased again to US$2.7 billion as the war ends. By the following years, the national debt had presented a rapid and sharp increase. The following years likewise reveals higher surpluses and deficits which triggered the increase of national debt history.
- See also: National debt of United Kingdom
After the Civil War, the next upsurge in the country’s debt was recorded. It was during the First World War, wherein the national debt increased to US$25.5 billion. Then it was succeeded by more surpluses and deficits. The pinpointed reason for this increase was the social programs conducted during the Great Depression. The major increase was thus recorded. In 1950, the country’s debt became US$260 billion. Then from 1965 onwards, the national debt continues to increase. This is the result of the rapid increase of the debt as against the growth or increase of the GDP. During the reign or Presidents Bush and Reagan, the debt had increased four times. In President Bush’ time, the country’s debt increased to US$5.7 trillion in 2001, and US$10.7 trillion in 2008. In President Barack Obama’s reign, a US$14.2 trillion public debt was recorded as of February 2011, and it had increased until today.
Markable and non-markable securities
As already mentioned, part of the public gross debt of the United States are those accounts which are held by the intragovernmental agencies and the public. Part of national debt history is the classification of national or public debts as marketable or non-marketable securities. Marketable securities include bills, bonds, and treasury notes which are held by the governments and investors world-wide. On the other hand, the securities, which are non-marketable, are composed of government account series which are owed from trust funds of the government. Some other reasons for the fast increasing public debt of the United States is its absorption of other financial obligations. One of which is its act of taking over Freddie Mac and Fannie Mae. These are government subsidized enterprises in which the government spends as per budget.
By 2010, the federal government spent US$110 billion to Freddie and Fannie. Also, the federal government excludes from the gross public debt guaranteed obligations. These debt guaranteed obligations are those which the federal government guaranteed to banks, corporations and mutual funds, aimed at dealing with financial crisis for a definite fiscal year. However, direct investments or funding by the federal government during crisis could form part of the national debt history. Also excluded from the public debt are unfunded obligations. The current value of unfunded obligations or deficits is estimated at about US$45.8 trillion. These include Medicare, Social Security, and Medicaid that the federal government provides for its populace. Citing the above amount, and adding it with the current public debt will definitely increase the latter. If unfunded obligation be included in the computation of gross public debts, it is likely that the latter may reach hundreds of trillions in no time.
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The history of the US national debt is always discussed together with GDP. GDP is verily important in the economic aspect of all governments. It is the amount of the entire size, result or output of a particular government’s economy. To measure the government’s burden, it must be related with the GDP. In the United States, the public debt is sometimes way higher than the GDP, a factor which adds up to the ever increasing public debt of the federal government.
Debt growing 100 %
Meanwhile, the federal government has its picture that the public debt will grow at about 100% of the GDP by 2015. The national debt history of the United States likewise increased due to the interests which it is paying. Like ordinary debts or loans, unpaid obligations incurred in interests as well. The higher the amount of the debt, the more interests it will have. In 2008, the federal government had paid exceedingly US$430 billion of interest from its existing debt. Resultantly, debts of the government continue to accrue so as the interests therein. Financially, or economically, this increasing debt of the United States poses a risk at slowing economic growth. The US national debt history has not improved since then. As per calculation and estimate by economic authorities, by the year 2020, it is possible that the United States will face greater economic challenger. Meaning, it may suffer financial reverses, including of course increase in the national debt.
In computing for the yearly change in debts of the United States the total deficit is considered. Also, supplemental appropriations while being beyond the budget procedure in its entirety, is included in determining the national debt. The national debt history of the US though surprisingly high has its boundaries or ceiling. The United States is now suffering with immense financial problem with respect to public debts. Under its Constitution, The Congress has the exclusive power or authority to appropriate money from the US credit. Since the establishment of the federal government, it provide for a flexible method of providing and incurring credit. However, under the Second Liberty Bond Act of 1917, the Congress must establish a cumulative limit as to the extent of bonds to be issued.
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Under the national debt history, the current debt ceiling must be applied to all federal debts. The treasury is only authorized to issue debts which are necessary to fund the operations of the federal government, though there are some restricted exceptions.
