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Important Issue: U.S Debt Crisis

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Important Issue: U.S Debt Crisis

The united stated debt crisis has increased with the government relying on $15 trillion borrowed funds to fund its operations this year. The government borrows money when its spending exceeds the interest or revenue collected from people. Hence, it is forced to borrow to have enough funds to finance its operations. Borrowing more money usually seems the better option since many crucial activities could be left out such as medical provisions or others subsidies. This would mean that the government would have to take up another loan. At one time, this money will have to e refunded to the owners. Hence, the government should have a source of revenue from which to pay its debt. For a government, revenue comes from people through taxes mainly. Hence, the crisis will affect the whole community. The congress is having a difficult time discussing whether to take up another loan or just cut the costs. Either way, there are consequences to the community (Robertson & Kiladze, 2011).

The current United States debt crisis is going higher and a means of reducing it will have to be implemented. This is to mean that all people in the country will be affected. One of the measures the governments take to rectify the situation is raising the tax. This means buying goods at a higher price, as well as paying higher for services. Many people with debts will have to pay higher interest rates in order to raise more revenue to go towards reducing the debt. This is due to massive losses incurred by banks; hence, they need to raise the interest rates, and reduce the depositing rates to encourage people to deposit more money. More so, investors or people who are paying mortgages could end up paying higher than they are currently paying. This makes the debt crisis essential for everybody. Any decision made will affect the people significantly, from the younger generation to the older generation.

Currently, the United States Congress is discussing the way forward for taking care of the debt crisis. There is a suggestion to cut on the spending, meaning many provisions will no longer be provided (bc.co.uk, 2011). Some of the important provisions such as health care, which is one of the biggest costs in America, could be reduced. This would leave the people with a huge responsibility over their healthcare. This is an aim of reducing the spending by $1 trillion over the next 10 years. The other option by the government is raising the debt ceiling higher than it is. This would mean borrowing more money to finance the current debt of $15 trillion, which currently represents almost 99% of the nations annual output. This means the people will have to raise more money to account for the debt, and costs will still have to be reduced to make more money for clearing its debt (bc.co.uk, 2011).

If the issue will not have a solution, the whole community could lose since the prices will go quite high, especially if there are no more funds for funding some of the provisions; hence everybody ranging from individuals to firms will be forced to cut their spending to cater for some of these provisions. The younger generation could be hurt if firms were to reduce the costs. One of the measures that firms would take would be cutting on their human labor costs that are currently high, most of the young generation would be laid-off as a cost cutting measure (Robertson & Kiladze, 2011)

The debt crisis issue is quite significant considering the effect it has on the whole community. The American debt crisis not only affects Americans, but also other countries that do business or trade with them. Currently, the debt on the Americans is quite large and taking 99% of its annual output will require time as well as a big effort to stabilize. The people will be greatly affected by the situation if a solution does not arise soon considering that costs will continue accumulating if the, government does not control the spending or takes another debt to finance the current debt as they reduce on the costs to acquire more revenue to pay up its debts. Currently the government is not in a position to pay its bills, ad this will be extended to the community.

References

bc.co.uk. (2011). Super-committee’ on brink of US deficit failure. Retrieved from http://www.bbc.co.uk/news/business-15814728

Robertson, G., & Kiladze, T. (2011). Consequences of U.S. debt crisis could be far-reaching. Retrieved from http://www.theglobeandmail.com/news/world/americas/consequences-of-us-debt-crisis-could-be-far-reaching/article2113734/page2/

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