The US government has recorded a whopping $17.687 trillion in national debt as of 31st July 2014, with the last $7 trillion coming in less than 67 months. The Obama administration, which has, time and again, been criticized for its reckless spending on healthcare programs, has put each taxpayer under an insurmountable debt of $1.1 million as per the latest data revealed by the US Department of Treasury. 

While most of us are still basking in the glory of 4% growth in the second quarter of 2014, it must be noted that this debt, like any other debt, has to be cleared eventually. The government has taken this huge debt to fund its present day programs by selling Treasury bonds to other nations and financial institutions, with China ($1.3 trillion) being the biggest bond-holder. This is a dangerous situation which puts the future at great risk and severely limits the growth of the economy in the long-term. In case it seems unrealistic, one must take a cue from the recent Argentina default, which has led to an extreme devaluation of its currency and left the nation struggling to cope up with surging inflation. 

In simple terms, this rising national debt should not be taken lightly as when the debt exceeds the GDP, the economy begins a terminal decline. China, which has a debt to GDP ratio of 250 percent, has been facing slowdown for the past several quarters with the July HSBC reading dropping to a 9-year low of 50, indicating stagnation in the global growth driver. The Congressional Budget Office has predicted that the US debt held by the public will be 106 percent of the GDP by 2039.     

The Federal government must look at other avenues to boost the revenues and cut down on its excessive spending, for a more financially sustainable economy. The Congressional Budget Office has rightly called for more prudent measures to heal this economy rather than burdening it with more debt and delaying the ‘real’ economic recovery, which every taxpayer deserves.

By: Nikhil Gupta
Financial markets Researcher/Analyst