The Effects of National Debt on the Economy

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Table of Contents

Abstract………………………………………………………………………………………………………………………………………..3 Introduction………………………………………………………………………………………………………………………………….4 Literature Review………………………………………………………………………………………………………………………….9 Discussion…………………………………………………………………………………………………………………………………….10 References……………………………………………………………………………………………………………………………………11

Abstract
This article discusses the shape the economy is in. Then the article examines what national debt is, and the national debt in America. Next, the article examines the recession in detail. The the article explains some the negative effects of the recession. Finally, the author of this article discusses some of the things the government has done, and the things they are doing to fix the national debt problem.

I.Introduction
It is safe to say that the current US economy is in turmoil. From failing companies to housing foreclosures, we can see that something needed to be done to turn our economic position around. In 2008, President Barack Obama passed a stimulus package in hopes that it would return the US economy back to a normal standing. The tax stimulus that was extended to the US economy has impacted the US by providing more education and healthcare, unemployment benefits, bankrupting companies, putting more money into the economy, but in returned increased the national debt and affected society as a whole. The United Sates National debt dates back to 1789. It was on September 18 of this year that Alexander Hamilton, secretary of the treasury, asked the Bank of New York for a loan. The loan amount was for $19,608.81, which was the start of the National Debt under the new constitution. This was unusual in that time because government was considered to be a bad credit risk. Mr. Hamilton read deep into politics and discovered that having a national debt was actually profitable. It allowed money to be borrowed in government issued bonds. Today the bond market is a huge hazard and our national debt is out of control. There are two types of borrowing that must be considered. The first type is internal borrowing or borrowing from within. When it comes to the US, when they borrow internally they borrow from the US citizens. No debt is good, but this debt is lessened because the debt is held within and it is only owed from citizen to citizen. The second type of debt is external debt. This type of debt is when the borrower borrows money from outside sources or in the US’ case from foreign governments. This is considered a worse type of debt because the debt owed accrues interest and harder to pay back. The problem with the US deficit is the fact that fifty-four percent of this debt is external debt. This leaves a large portion of the debt accruing interest and potentially taking twice as long to pay it off. A majority of the money that went into the stimulus bill was borrowed from foreign countries. This impacts the US economy is a huge way. Not only did the National Debt rise due to the stimulus package, but will continue to rise every year that goes by that it isn’t paid; due to interest. The current national debt is about $13.7 trillion. With a US population of about 310 billion, it makes each US citizens share of the debt about $44,375.75. The stimulus plan has attributed $787 billion to the national debt. The biggest expenditures that the tax stimulus contributed to were unemployment, education and healthcare, and tax cuts. About $72.4 billion was allocated in education; $126.4 billion was allocated in healthcare, and about another $244.6 billion in tax cuts. The great recession in the United States is believed to have started in late 2007. The cause of the crisis was tied to reckless lending practices, a surge in mortgage loan defaults and the collapse of the U.S housing market. The recession has had several impacts, it increased the national poverty rate, and more than 44 million...
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