United States Debt in Which They Are Responsible for

Topics: United States public debt, United States, Deficit Pages: 8 (2798 words) Published: September 3, 2013
The United States deficit contributes to its debt and the debt contributes to the deficit. We know the longest running uninterrupted surplus for the Unites States was from 1920 to 1930 but spent most of it combating the war. This will show how the U.S. deficits, debt, and surplus affect the following areas; the taxpayers, future social security and Medicare users, unemployed individuals, University of Phoenix students, The United States financial reputation on an international level, a domestic automobile manufacturer (exporter), and a Italian clothing company (importer). Taxpayers

This will show how the debt and deficit affects taxpayers. Taxpayers get caught up in the government debt and are left to pay it off. Individual debt is different from government debt, and the reasons for this are: (1) the government lives forever and people don’t, so the government is ongoing. When people die, all debts must be paid to old Uncle Sam before relatives get the reminder. (2) The government can print money and people cannot, and as long as another country accepts our currency, we can always exchange money with those countries. (3) The government owes much of it debt to itself. It is sort of like owing oneself so one will never go broke. The internal debt which is the debt owed to other governmental agencies or to its own citizens, and when it pays on its internal debt it involves a redistribution of the citizens but it does not reduce the income of the citizens. For example, say that a country has $3 trillion internal debt. Say also that the government pays $150 billion interest on its debt each year. That means the government must collect $150 billion in taxes, so people are $150 billion poorer; but it pays out $150 billion in interest to them, people in the country are neither richer nor poorer because of the debt (Colander 2010). The external debt is debt owed to individuals in foreign countries and it is more like an individual’s debt (Colander 2010). When the United States pays interest on external debts, it involves a net reduction in domestic income, and Joe the taxpayer will be poorer and foreign holders of U.S. bonds will be richer. Future Social Security and Medicare Users

Social security benefits applications from baby boomer are flooding offices, and the $2.7 trillion dollar surplus is starting to look small. For decades Social Security produced big surpluses and paid out disability benefits to retirees, disabled workers, spouses, and children. It also helped to mask the deficit produced by the government. Those days are gone because the social security is paying out more benefits and collecting less in taxes. Trustees of the agency are urging Congress to address the program’s long term finances. Trustees predict the surplus will be gone in 2033, and unless Congress does something to change it the program will only collect enough taxes each year to pay out about 75 percent of benefits which will trigger an automatic reduction. But once the surplus is spent, the annual funding gaps start off big and grow fast, which could make them hard to rein in if Congress procrastinates. There is a projection of a shortfall of $623 billion in 2033 is $623 billion, according to social security trustees reports. Add up 75 years' worth of shortfalls and it comes to $134 trillion. Now we may not have to worry about the situation but the next generation will if congress does not act. The chart below shows the annual social security benefits for medium earner under current law and recent reform proposals. Medicare’s Hospital Insurance Fund is projected to run out in 2024, which is five years less than projected last year. Medicare and Social Security face a number of challenges in the coming years, including changing demographics and rising health costs. We need to make sure that those working toward retirement will be able to count on receiving the Medicare and Social Security benefits they’ve earned...

References: AARP (2013)
ABC NEWS Medicare and Social Security Will Run out Sooner Than Thought (2011) http://abcnews.go.com/blogs/politics/2011/05/medicare-and-social-security-will- run-out-sooner-than-thought/
Colander, D. C (2010) Macroeconomics (8th Ed) Boston, MA: McGraw-Hill/Irwin.
Mohamed A. El-Erian 21 (December 2012) Retrieved from
http://www.economywatch.com/economy-business-and-finance-news/risky-new- era-for-central-banks-and-monetary-policy.21-12.html
Ostermiller, S. (2003-2013) The Currency Converter Retrieved from http://coinmill.com/EUR_USD.html
Ohlemacher, Stephen (2012) Social Security surplus dwarfed by future deficit
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