A Government In Debt
When talking about economics, there’s one issue everyone would try to avoid: Debt, whereby owing someone money. Now, the US government also faces debt.
OK, now usually a government shouldn’t run out of money. It could have just printed money to pay off all debts. But things aren’t that easy. You see, printing money does make everyone much richer. However, goods that get traded for aren’t increasing as fast. You could only buy that much stuff, so money decreases in value. That is called inflation. And due to the increased demand, firms usually put up prices. That isn’t a good option for paying off government debt. So how did the government get into debt in the first place?
Well, think of a government like a business, if you will. It has income, mainly from taxes paid by the people. And it also has output, creating services for the people. These include providing military protection, education and health programs, other social services. There are also things like infrastructure, fixing roads, and bridges. But these all depend on how much tax gets collected. Sometimes the government borrows money to make up for the difference, hence creating “debt.”
That happened a lot, as the United States Congress passed large Covid-19 assistance programs. These are executed by the President. Sometimes the President borrows too much. To prevent too much debt, Congress also restricted that with the “debt ceiling.” OK, so maybe this is kind of not fair to the President. They execute the bills, and borrow money along the way, while they can’t borrow too much, which isn’t quite possible due to a big package and not enough taxes.
Anyway, it seems that the United States government is saved, at least for now, due to a temporal spending bill that passed a few days ago. It will stop the government from shutting down in the middle of October by raising the debt ceiling. But still, the problem isn’t solved since the measure only lasts until December. Then debt would once again return, trying to ruin the economy and lower US credit ratings.
So how is all this going to affect your life? Experts think that when the debt ceiling gets reached, the US could plunge into an instant recession. You see, because the government is more reliable in paying lenders back, other businesses need to have higher interest rates to get the trust of lenders. If the debt ceiling gets reached, the government gives higher interest. Then other companies and businesses would need to pay even higher interest rates. Sometimes it’s more than their income, so they would likely quit. It’s a dead end. Millions of jobs would get lost, and stock markets would plummet. It would also interfere with global trading. And when happening around the Christmas season, it doesn’t sound like a great day.
In an interview with Professor Tigger, an economist who has been looking into these issues, he said that maybe we shouldn’t fear it too much. “From the time of Gerald Ford, there have been about 20 government shutdowns in the US.” So what do you think? Is the debt ceiling a good thing? Or is it going to cause serious problems? That is the end of this production from the New News Newsminute. Thank you, and tune in next time for more updates. By the way, I think maybe they should wait for Santa to give out free money! Oh, right, inflation. I guess that isn’t a great idea after all.