Total US debt now exceeds $21 trillion, and how this will land on the middle class.
The fact that the U.S. national debt has now surpassed $21 trillion raises a number of important concerns. What are the consequences of amassing such a large public debt? How will it affect the future of our children and grandchildren? Will the government increase our tax burden? Is there a mega house of cards waiting to collapse? These are only a few of the questions on the minds of Americans as we face the largest debt in the USA's 240-year history.
It seems politicians like to make relatively simple issues appear complex. Why? Perhaps it is because they want to make us think we need them. In truth, the real reason America is in such dreadful financial straits is not at all complicated. Between 1900 and 2015, the federal government’s budget had a deficit in 89 out of 116 years or 77% of the time. When a nation continually overspends, there is only one possible result: greater debt.
This is one of the most important issues of the day. Everyone agrees that the debt will continue to rise. How will this affect the country? If it gets too large, there would be a reluctance to purchase U.S. government debt (i.e. bonds). If the reluctance is significant, it would create fear in those holding U.S. government debt (i.e. fear of default). This would cause the value of U.S. debt (i.e. bond prices) to fall. Such an event would send shock waves throughout the global financial system.
The more likely scenario, is that the government will attempt to raise taxes to reduce the debt and attempt to instill fiscal order. To achieve this, Congress would need to raise revenue through tax hikes and cut spending. Increasing revenue would prove difficult because if the government taxes high-income individuals too much, they might relocate to a more tax-friendly country. Thus, the ultimate target would be on the backs of the middle class. Unfortunately, too many are not thinking this issue through to its logical end.
Do not be deceived, the federal government will raise taxes on the middle-class because there is a limit on the amount you can tax wealthier individuals and the poor have very little to pay. A larger government leads to higher taxes (to support it), which leads to a shrinking middle class. The middle class is shrinking because of higher taxation and companies leaving America for Ireland, the United Kingdom, and other tax-friendly locales. Do not be fooled by politicians who say, “We must be willing to pay our fair share.” Remember, they are the ones defining “fair share,” not us.