Sustainable Debt

The Christian Science Monitor reported that the current national debt totals $8.3 trillion dollars. The public debt is a larger share of the national economy than the past decade and more than half of it is held by foreigners. The debt includes two types of debt. These are debt owed to the public, including foreign lenders and debt owed from some government units to others.

The situation now is really very different from the 1980s," says Alice Rivlin,
former vice chair of the Federal Reserve. As the costs of programs such as
Medicare rise, she says, "we can't go on into the next decade ... still running
deficits as our major way of coping.

The big issue is the nations ability of withstand the costs associated with baby boomer retirements, which are only a few years away. To cover entitlement costs, taxes would have to be raised by 50%. Economists vary in their estimates of how government size effects economic growth however they all agree that the rising debt could have a harmful effect on the economy.

After the American Revolution, the nation was in 77.1 million dollars of debt, a large sum for those times. 11.7 million was owed to foreign governments, 40.4 million was owed to Americans, mainly soldiers and 25 million was state debt. Alexander Hamilton, the first secretary of the treasury suggested three solutions. All debt would be paid at face value and the national government assumes all debt. New American industry would be protected by high tariffs being put on imports. A national bank would be created from all funds from taxes and tariffs and it would print bank notes. The United States was able to recover from owing such a large amount of debt.