• How the US national debt does compared to other industrialized France, Italy and the United Kingdom?

The US national debt refers to the amount of money the government owes its creditors. Notably, the national debt escalates as the government expenditure exceeds its income.  According to US Treasury statistics, the national debt had reached $21.974 trillion by 3rd January 2019. Furthermore, since January 2017 when President Trump took office, the national debt has increased by 10 percent. Under the Obama administration, the national debt increased by 100 percent, i.e. from $10 trillion to $ 20 trillion.

The US national debt has characterized the country’s operations since its independence. For instance, following the revolutionary war in 1790 the US made a first national debt, and this then the national debt has persisted over centuries due to wars, inflation, and economic recession.  Even though deflation periods nominally reduce the debt size, the real value of debt keeps on increasing, in the sense that tightened money supply results to increased money value in the deflation period. Therefore, borrowers pay more even if the debt payment becomes static. The modern-day government has tried to keep expenditure below what it takes for about 60 years, and this has made balanced budgets almost impractical. During President Ronald Reagan administration the national debt increased tremendously, and the trend has maintained in the subsequent regimes.  According to the US treasury department, the national debt has risen consistently over the past two decades. However, the US national experienced a dramatic downward trend in the 1990s during the Clinton administration and the economic markets heyday.

The US has the highest national debt compared with other developed nations, in 2016 the US gross debt hit $20 trillion, followed by Japan at about $11 trillion(1,285 trillion yen). China came third with about $5trillin (34.5 trillion yuan). Gross debt is the total public debt including the much the government owes self and intra-governmental debt.

• There seems to be a surge in national debt during the G.W Bush and Obama administration. Why is that? Name the specific programs and circumstances that contributed to the escalation of the US national debt under these presidents?

The best way to evaluate national debt is to measure it according to regimes for example when a president enters and leaves office and the programs that responsible for the debt change. During President G.W Bush and Obama administration the national debt escalated as they implemented the various programs.  President Bush increased the national debt by 101 percent since he joined the office in 2001, adding it by $5.8 trillion. Some of the programs responsible for the surge in federal debt include the war on terror following the 9/11 attack.  Terror war went beyond borders and two significant wars drained the US financially, the Iraq and Afghanistan war that cost $1trillion and $1.1 trillion respectively. The wars increased the US military spending from $600 billion to $800 billion annually.

President Bush in response in the 2001 recession ratified and implemented the Jobs and Growth Tax Relief Reconciliation Act and Economic Growth and Tax Relief Reconciliation Act. Consequently, Bush approved $700 billion to act as a bailout for banks to tackle the 2008 recession. Notably, both president Obama and Bush had to utilize a characteristically  high budget for Social Security and Medicare.

Obama administration grew the national debt by adding $8.588 trillion, accounting for 74 percent and fifth largest. Obama administration introduced programs such as economic stimulus package which included an increase of unemployment benefits, tax reduction and funding of government projects. Obama tax reduction added on the national debt by $858 billion in two years.  Again, the Obama budget went up on defense where the government spent around $700 to $800 billion annually. The federal income was low during the 2008 global financial crisis. Obama also implemented Patient Protection and Affordable Care Act., and even though the healthcare program was designed to decrease the national debt by $143 billion for 10 years, it delayed to yield returns till later years.

• In general what are the consequences of a massive national debt? Are any of these consequences currently observed in the US economy, why or why not?

The national debt has far-reaching effects on the citizenry; therefore debt affects people in the following ways. First, as the national debt increases against per capita the chances of the government defaulting on its debt obligations increases and this forces Treasury to create new treasury securities to incentivize potential investors. Consequently, low tax revenue is experienced and low standards of living because the government cannot borrow more to fund projects.  Secondly, the cost of living increases as people are forced to pay more for products due to the increased risk of corporations operating in the US. The security bonds rise, and companies raise the price of their services and products. Thirdly, the yield on treasury security goes up and leads to increase of cost of borrowing money to buy a home; this is because of the market lending mortgage linked to short-term interest offered by Federal Reserve. The ultimate effect is the reduced value of homes.  Fourth, the most significant impact of the nation defaulting debt service obligation is the high risks of losing socio-economic and political power. The scenario makes a debt a major national security issue.

• Do you think that the massive US national debt is going to hamper the US economic growth as some have claimed?

I think the vast national debt can negatively affect the country in the sense that there will be a significant slowdown in economic growth.  High federal deficits increase interest rates, and this discourages private investors and raises inflation. The high national debt affects American citizens, but the most vulnerable groups include the majority of the middle class, the poor and elderly.  Generally, national debt affects every sector of the economy, and this is why policymakers should design policies to mitigate the effects.

• Based on your research is it possible for the US to default on its debt in the future? Explain

There are no chances of US defaulting on its national debt because every bit of national debt owed in only one currency: dollars. Therefore, there is no single debt the US cannot repay with a keystroke. A sovereign nation that provides its own free-floating currency cannot risk default because of the debts in denominated the same currency.

• Why the Nobel winning economist, Paul Krugman, is not alarmed as many others are with respect to the high level of US national debt.

Paul Krugman is not alarmed with escalating US national debt as he argues that the economy needs national debt as it allows the implementation of useful projects such as water systems, roads, rails, etc. Therefore he explains that its good to borrow to invest for the future. Again low government interests imply that the economy is not doing well. Outstanding debt allows the economy to perform well as investors are helped to make a transaction and manage risks.