The National Debt: What’s Behind All Those Zeros?

by Diana Drake

When U.S. president Donald Trump was running for office, he made lots of promises – including a big one that he would eliminate the national debt. This week Mick Mulvaney, the president’s budget director, commented on Trump’s campaign declaration during a conversation with CNBC’s John Harwood, saying, “It’s fairly safe to assume that was hyperbole. I’m not going to be able to pay off $20 trillion worth of debt in four years.”

Empty campaign promises, especially those involving money, are not too surprising. The real shocker in Mulvaney’s comment involves all those zeros. The U.S. has a $20 trillion national debt, prompting many in recent years to characterize America’s fiscal situation as a true “debt crisis.”

What’s All the Fuss About?

The national debt is the amount of money owed by the federal government. The U.S. federal government is running a deficit (more liabilities than assets), annually spending more money than the revenues it takes in. To make up for this, the U.S. borrows money to pay its bills, adding to the national debt. And when you borrow money, you must pay interest on that loan. All of this is leading to what many believe are serious long-term fiscal and economic challenges for the country, which will fall squarely on the shoulders of younger generations, like millennials. Today’s students are tomorrow’s workers and taxpayers. For one, they will face the higher tax burdens needed to fund the government and its interest obligations.

“As a student who is planning on graduating in the next two years, I want to go out to the work force in a stable economy,” says Fiorella Riccobono, a sophomore at Florida State University who is on a personal mission to raise awareness about the national debt and help to find solutions. “The national debt has a direct impact on our personal lives. It influences the way the federal budget is crafted. In just over a decade, interest costs will be the third largest category of the federal budget. The federal government now spends more on interest payments than it has typically spent each year on education. Research proves that developed economies, much like the United States, are at risk of dangerous and extended reductions in economic growth when public debt reaches levels of 90% of GDP. The congressional budget office projects that under current law, federal debt will climb to 141% of GDP within 30 years, which is much greater than our country’s entire economic output.”

“Citizens assume it is up to the federal government to create policy changes that will address these issues. It isn’t only up to the public sector, it truly is up to us.” — Fiorella Riccobono

Since government debt increases as a result of government spending, one of the ways to influence change related to the national debt is to think of new ways to craft the public policy that impacts government spending – around issues like health care, services for the homeless, education, and the like. Riccobono, a finance and economics major, is a member of Up to Us, a non-partisan program that empowers students to educate their peers on long-term national debt and how it could affect their economic opportunities. Along with a team of four other Florida State students, she competed in this year’s Up to Us campus competition, and is now among the top 20 finalists. To qualify for the top 20, Riccobono’s team planned and executed activities on campus to engage and educate their peers about the national debt.

The Florida State team advocates for solutions involving social entrepreneurship as a way to decrease dependence on government funds. The group held an event for more than 100 students to debate current issues that influence the federal budget, brainstorm solutions to the national debt, and hear from local social entrepreneurs like Unhoused Humanity, an online funding platform that connects donors with homeless men, women and children; and The Sharing Tree, a reusable resource center that collects and redistributes reusable materials to the community. “Students at our event were blurring the lines of the traditional sectors to create innovative change. It was combining the practices of the public sector [government], private sector [businesses], and nonprofits, to create systemic change that the country definitely needs.”

Thinking about How Our Communities Work

The bottom line is that if a system isn’t working – for instance, national debt continues to pile up — creative solutions can help drive change. Since students may well inherit these economic challenges, they need to be aware that they exist and even start to problem-solve for a more fiscally sound future.

“Citizens assume it is up to the federal government to create policy changes that will address these issues,” notes Riccobono. “However, people underestimate their influence and the power of the other sectors. It isn’t only up to the public sector, it truly is up to us. Why do we turn to our governments to solve some of society’s biggest problems? Combining the infrastructure of all of the sectors is the key to solving massive problems that range from our country’s national debt to climate change and access to clean water. How can students combat the national debt when they are one student in a crowd of millions? By starting local, by using local governments, local nonprofits and local businesses to modify the way in which their communities work – and by getting involved with local citizens to create innovative avenues to change that work in their communities. If students can change the budget in their local communities, maybe their impact will influence federal spending.”

And what of those critics who say that America’s national debt is actually beneficial and that we should have even more? Issuing debt is a way to pay for useful things, like building new roads and bridges. In fact, many economists believe that some government debt is necessary. Riccobono and her Up to Us compatriots aren’t buying it. “Many argue that there is nothing scary about the rising national debt and that the debt crisis is just a tool used to instill fear in Americans. While I understand that some debt, while properly used, can safely finance private and government investments to generate productive capital to support economic growth, we have crossed the threshold of safe debt,” says Riccobono. “We need to create plans that have sustainable trajectory and do not create government dependency.”

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Conversation Starters

What is the national debt? Do you see it as a threat to your future? Why or why not?

What does Fiorella Riccobono mean when she says, “People underestimate their influence and the power of the other sectors. It isn’t only up to the public sector, it truly is up to us.”?

Have you heard the expression “Think globally, act locally?” What does it mean and how does it fit into this discussion around the national debt?

13 comments on “The National Debt: What’s Behind All Those Zeros?

  1. I think the national debt is a problem because it keeps rising and the United States is not paying it off. I think we should cut unnecessary spending on programs and projects and we could save millions or even billions and slowly pay off our debt instead of adding to it. Also this article said we are 20 trillion in debt holy cow is that a lot we need to work towards lowering that and stop raising it. We need to find a way to make all the government programs more affordable and and get more people higher paying jobs or even jobs to cut some of the programs like food stamps they probably cost a fortune and the government spends a lot on that. So the U.S. needs to start to find ways to lower it and quickly because it is out of hand.

  2. Fiorella means that the people don’t truly understand that they have the ability to influence other sectors too. If the people make a big deal about a certain thing like the amount of debt the government is in. It will influence others to find a way to fix the problem and lower the national debt. It is up to the people if they want to cause change.

  3. National debt is definitely a large problem in the US right now, and perhaps one of the biggest. It’s pretty scary if you think about it, but I adore to side with Up to Us. We can’t keep our debt sky high. At least lower it a substantial amount before feeling that we could use it for beneficial reasons. It really shouldn’t be beneficial at all, but there’s a side that thinks so that needs persuading.

  4. After reading this it opens your mind and for you to realize that the national debt is one of the most important and most difficult issue to solve. Without cutting defense spending and without cutting medicare and medicaid the national debt will never be paid off. This can cause long term effects on us like Fiorella Riccobono stated from Florida State. The people in government might not care because they are not the ones who will be paying off it will be us the millennials. I think we should take a serious look at this crisis and stop borrowing money so much.

  5. National debt is a key issue that political leaders seem to be focusing on in today’s society. Sadly, their attention in this area is misplaced. That is because debt will naturally exist as long as money is present in this society. Fractional reserve banking, which is how the banks today operate, essentially keeps 10% of money deposited in its reserves, while lending and investing the rest of the 90%. This puts more money in the market, and this fractional reserve system basically creates money out of nothing. $1000 has 10% kept in the bank’s safe, while the $900 is lent out. Thus, there is now $1900 in the market. This process loops over and over again and more money is created. Statistics show that 97% of all money in circulation today is created by banks, not the government. As the money did not previously exist, it is debt that is being created by the banks. Also, all money is loaned out by either the government or banks, so the money we have today can be classified as debt. Our current national debt crisis proves this point. Standing at $20 trillion and increasing, it has been almost two centuries since America was last debt-free. The last time the national debt was brought down to $0 was in 1835 under President Andrew Jackson. During this time, President Jackson effectively “killed off” the central bank and successfully repaid the $58 million of national debt he received upon entering office within 6 years. Killing off the central bank through his infamous “Bank War” may have stopped the creation of debt in the country, hence, allowing the country’s output to catch up to the federal debt level. Although this tactic lasted for only a year, it goes to show today’s misplaced attention on creating surplus instead of other issues. Nonetheless, money is a crucial element in today’s society and banks cannot be erased like they were under President Jackson’s presidency. Thus, like the economists referred in the article states, the national debt is necessary. I am simply wondering what effects the large figure of -$2000000000000 will have on our society. I do not have substantial knowledge in this area and cannot assess if it shall be a threat, but I feel that not much can be done by citizens to prevent the rise of our national debt.

    – Michael Chan

  6. I think this is a really great article as it successfully addresses some of the most pressing issues behind America’s national debt. Not only does it really hammer away at the fundamental problems behind our enormously large national debt, but it also provides guidance as to how we, as a nation, can start to solve this gigantic problem.

    First, I am glad that the article highlights the serious nature of this issue because I believe that one of the major reasons our debt continues to skyrocket at this rapid pace is a lack of awareness and concern about the issue. Yes, I agree some debt can be good. In fact, most economists will agree that having a budget deficit may be necessary to maintain the economy during downturns and recessions. Keynesian economists will swear by their lives that the government must increase its spending and/or reduce taxes (and thus go into debt) to shift the aggregate demand curve to the right and return the economy to equilibrium. So, some level of debt is certainly acceptable and maybe even necessary. However, at $20 trillion, America’s current national debt level is just too high.

    As the article states, several estimates predict the national debt to rise above 100% of our GDP quite soon. That means our government will be owing even more money than the output of our nation. That is a truly frightening prospect. Not only will future generations have to pay off that monstrous debt, but we will also have to deal with all the interest payments. As the article states, our government, as of now, spends more money paying interest on the debt than it spends on education. Mind-blowing! If our government keeps borrowing more and more, we will continue sacrificing our education and other things just to pay off the debt and the associated interest.

    If you are at least convinced that national debt is a problem, then you will be terrified to know that it is just going to continue to grow and grow unless we people make some concerted efforts to create change. Most politicians only care about getting elected to office and staying in office. Therefore, they never campaign on and implement policies that reduce spending and increase taxes (i.e. policies that reduce the debt) as they are very unpopular. Instead, they always try to cut taxes and increase spending to please voters. However, those policies invariably result in budget deficit, and thus an increase in debt. Moreover, the ideologies of both the mainstream parties lead to debt. Republicans’ focus on cutting taxes and increasing military spending tend to raise the debt while the Democrats’ focus on government spending for healthcare, education, etc. also lead to a rise in national debt.

    In order to truly grasp the difficulty in decreasing the national debt, I did some research and found a budget / debt simulation tool ( developed by the “Committee for a Responsible Federal Budget”. After running several simulations, I found out that even with lots of sacrifices and choosing policies that I do not agree with, I still found it extremely difficult and almost impossible to lower the debt to a safe level.

    Essentially, what the article and all the research and facts that I have indicated above tell us is that we shouldn’t depend entirely on the government to cut our national debt – it simply isn’t a plausible solution. Instead, as the article so wonderfully suggests, we must fundamentally change the system. We, the people of this great nation, must take it into our own hands and start solving the debt problem. We need to demand that our politicians take the “right actions” and not the popular actions and implement the key solutions suggested in the article. We must act and act now. This is a problem that can be solved!

  7. I agree that the US is spending way more than what they have and it needs to stop. If it is not prevented than we will end up in a financial crisis and that’s not good for our future economic position. I don’t think that we should punish the younger generations by increasing taxes because of our governments need to spend more than we have or make.

  8. National​ ​debt​ ​is​ ​a​ ​big​ ​threat​ ​to​ ​not​ ​just​ ​my​ ​future,​ ​but​ ​to​ ​the​ ​whole​ ​United
    States.​ ​If​ ​the​ ​government​ ​does​ ​not​ ​stop​ ​spending​ ​millions​ ​on​ ​unuseful​ ​organizations,​ ​this
    country’s’​ ​economy​ ​is​ ​doomed.​ ​The​ ​expression​ ​“think​ ​globally,​ ​act​ ​locally”​ ​means​ ​that​ ​in​ ​order​ ​to
    fix​ ​something​ ​globally,​ ​you​ ​must​ ​start​ ​locally.​ ​Examples​ ​are​ ​local​ ​government​ ​or​ ​organizations
    that​ ​could​ ​help​ ​fix​ ​the​ ​problem.​ ​Fiorella​ ​was​ ​saying​ ​that​ ​it​ ​is​ ​the​ ​people​ ​that​ ​help​ ​the​ ​government
    fix​ ​its​ ​problems.​ ​The​ ​government​ ​cannot​ ​fix​ ​things​ ​just​ ​by​ ​itself.​ ​It​ ​needs​ ​the​ ​support​ ​of​ ​its
    people.​ ​What​ ​the​ ​government​ ​should​ ​to​ ​to​ ​at​ ​least​ ​try​ ​to​ ​fix​ ​our​ ​national​ ​debt​ ​is​ ​to​ ​cut​ ​budgets​ ​on
    projects​ ​or​ ​corporations​ ​that​ ​are​ ​not​ ​beneficial​ ​to​ ​the​ ​United​ ​States.

  9. I read the article “The national debt: What’s behind all of those zeros?” It talks about how Donald Trump wanted to eliminate the nationaL debt. Students from different schools were explaining how that would be impossible to do. Trump won’t be able to pay off $20 trillion worth of debt in four years. I am reflecting to this article because not only did our president make a promise that he won’t be able to keep. We are still in debt because we buy things when we don’t have the money for it.Students need to take personal finance class so they know how to handle money and so that our generation won’t go into debt.

  10. Ms. Ricobonno is exactly right in stating that it is up to us, the common citizens, to rein our burgeoning national debt, because while it is easy to blame our problems on the politicians and fat cats, the real problem lies with a lack of prioritization when heading to the polls. Voters want three things from their elected officials: tax cuts, maintenance (or expansion, depending on party) of social welfare programs, and reductions in the national debt. Of course, only two of the three aforementioned items are achievable concurrently, and unfortunately, for decades, voters have prioritized the first two over the third.

    So how do we solve the debt? It’s not an easy problem, especially since neither side of the political spectrum has proffered any pragmatic solutions. Conservative politicians pass tax cuts, claiming that they will slash the budget to pay for them, but thanks to the enduring popularity of government welfare programs, they never do. At the other end, progressive lawmakers promise massive welfare expansion, with “Medicare for all,” declaring that they will make the “wealthy pay their fair share” to cover the costs, which, while appealing, is impractical because this will lead to economic decline, and we will need a roaring economy to even hope to return our debt to healthy levels. Amid increasing polarization, the rare moderate voice calling for responsible spending and tax policies is drowned out. The only way, then, to solve our national debt is to be that moderate voice in the polling booth.

    What is the moderate solution to the problem? I think it is to maintain (or at most slightly increase) tax levels (America will need a growing economy to pay back its debt, and jacking up tax rates will undermine that) and to decrease government spending.

    So how do we cut spending? Unfortunately, Ms. Ricobonno’s solution of having an effect in communities may not work, because local spending is largely discretionary, whereas the vast majority of federal spending is mandated. Moreover, while local spending would focus primarily on items such as education and police / corrections, the federal budget is primarily comprised of massive social welfare programs like Social Security, Medicare, and Medicaid. However, I do think she is correct in stating that raising public awareness is critical, but not exactly in the way she suggests. I see the key problem as a lack of fiscal awareness among the general populous. As such, I think the best thing a student can do to contribute to solving our national debt problems is to petition their school or university to mandate classes (or at least assemblies) on fiscal responsibility, as opposed to organizing an event on it. This is because the attendees of these events are likely already interested in fiscal issues, but it is more important to engage those who do not understand basic economic or personal finance principles. I think the best thing a private citizen can do is form an organization to petition news organizations to pay more attention to the national debt, as opposed to constantly focusing their coverage on the politics. I think this may be the only way to raise broad understanding of the debt issues among the entire citizenry; ad campaigns would be largely ineffective as the debt is an issue that needs to be discussed over a longer period of time.

    The national debt IS a solvable problem. The current federal deficit stands at $833 billion; significant cuts to military spending and minor cuts to social welfare programs (such as increasing the retirement age by 5 years) eliminate this. The key will be in raising public understanding of economic concepts. This is the long-term only way to counteract the increasingly polarizing messages and to get both sides of the aisle to work together to create a safer and more sustainable future for America.

    • I do not agree with the statement: “It is up to us, the common citizens, to rein in our burgeoning national debt.” Ananth, you say that a lack of prioritization when heading to the polls is a major problem in our national debt. However, when people go to vote, many things have to be considered. This includes things from the power they would have in the presidential chair to their morals and traits. Oftentimes, one of the candidates will promise something for their possible election that is not possible for them to do. For example, Donald Trump pledged he would eliminate the national debt over eight years. However, the debt has only become larger. When Trump took office in January 2017, the national debt stood at $19.9 trillion. In October 2020, the national debt reached a high of $27 trillion. That is an increase of almost 36% in less than four years.

      I like the fact that you acknowledged that solving our huge debt is not a simple problem. I agree with you that cutting our government spending will reduce the national debt. Despite this debt that has slowly become larger after each year, I believe that if the government can lower its budget, we should reduce our debt significantly within the coming years.

    • With a problem as timeless as the US national debt crisis, I just had to comment my thoughts about this issue. Ananth, I loved how you were able to combine cold hard facts with stellar analyses. You were able to concisely explain the progressive’s and conservative’s points of view about the national debt while refuting both and proving how taking a moderate stance can lead to a “safer and more sustainable future for America.” You were confident and bold in your opinions which made your writing more persuasive and easier to see the true scope of the issue of the national debt. Looking back, Ananth, it is unfortunate that our country still remains divided on the national debt crisis.

      Since the article was written, the national debt has increased an alarming 40% and currently stands at a toppling $28 trillion. Politics has somehow become even more polarized than in 2018, with leftists calling for high marginal tax rates while conservatives are championing tax cuts and budget slashing. Some insight that I would like to add to your analysis, Ananth, of the American political spectrum is the cyclical self-destructive nature that the national debt problem plays. For instance, when Donald Trump passed the 2017 Tax Cuts and Jobs Act, democrats advocated for decreasing the national debt and raising taxes. However, with President Joe Biden at the helm, Biden, since being sworn in, has pushed a $1.9 trillion stimulus package and is now proposing a $2 trillion green energy and infrastructure plan. This cycle of “your deficits are bad, and mine are good” creates a dangerous and hypocritical political climate where nothing gets done. The irresponsible actions and behaviors of both political parties eventually trickle down into the voters, which confuses and misguides voters who are not educated and aware of the national debt, causing them to make irresponsible decisions regarding the national debt in the polling booths.

      I agree with your solution Ananth that it is up to us to raise public awareness and responsibility about the national debt. Moreover, I think that it isn’t enough to just inform the public of the national debt, but also to inform them of the value they possess. Oftentimes voters either leave a blank vote, eenie meenie miney mo, or vote for whoever is affiliated with their political party without thinking about their policies, goals, and morals. Voters may also only hear out one political party’s points of view without even considering the other side’s stances and arguments. This mindless style of voting needs to stop as voting is a sacred right that deserves to be cast thoughtfully. Voting is one of the only times where you get to have a say in what happens in your country. If you waste your vote, you are stifling progress on key problems such as the national debt that have the potential to affect the fate of our country. It is important to educate the future of America about the importance of voting and fiscal responsibility so that they may make responsible decisions come voting time. Building a strong intellectual foundation for future generations will help them make better judgments for what is the best path for our country. Whether it be through mandatory school classes or seminars, students should start learning about the importance of voting and responsibility as early as middle school. We must remember that it is us the voters that put the people in charge into power. It is us voters that are responsible for building a better and more sustainable America. To make sure that we put the most responsible and qualified people in power, we have to do our due diligence while also making sure that others and future generations do the same. If we put someone who is completely incompetent and someone who doesn’t represent us into power, we only have ourselves to blame.

      We must remember at the end of the day that we are all American. We should care about the national debt crisis as it will determine our future and will impact generations to come. We must remember that we can determine our future. We must make sure that we are educating ourselves and others about the power we possess and the issues we face to create a better and more sustainable future.

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