By: Alejandro Moro-Araujo
How credible are Republicans‘ worries about the National Debt?
The United States currently owes roughly twenty-eight trillion dollars in debt. While this figure may seem concerning, it should not be. Republicans assert that foreign investors own too much of that debt. For decades, Republicans have claimed that increasing the national debt is dangerous, especially for the future of our country. While in reality, strategically using borrowed money can promote long term economic growth.
To fully understand America’s economic situation, one must grasp the origin of our debt. America’s debt increases when the government fails to generate enough revenue to cover its expenses. The government’s revenue comes from taxes. The government tends to spend that revenue on infrastructure and the military. When the government needs more capital, it issues bonds. These bonds pay interest and return the principal at maturity, the expiration date of bonds.
Republicans express particular concern that a third of our national debt belongs to foreign countries and investors. Republicans worry about what that means in relations between foreign investors and us. Many Republicans reference China’s store of over one trillion dollars of US debt and fear that countries like China will begin to dictate American economic policy. In 2012, Donald Trump said in reference to the debt that China is “raping this country,” and his fellow party member Mike Huckabee added that Americans are “getting shanghaied by China.” These offensive views express how Republicans see foreign investors and think we will become dependent on them. However, these concerns are unfounded. In January, China held only around five percent of the national debt, and it is not even our largest investor; Japan is. Furthermore, countries with whom we have strong alliances, like Britain, France, and Japan, hold a significantly larger piece of our national debt. In addition, these countries rely on U.S. military and economic support. Thus, they would not want to take action that negatively affects their relationship with the U.S.
Even if the US could not pay back the debt, there are ways to deal with such a problem, such as the renegotiation of debt. However, the US is a very favorable choice for foreign investors, since the US is considered a risk free country to invest in. This is because we have a stable government and economy that has a large probability of paying bonds back. Therefore, we should not concern ourselves with what foreing investors might want to do to the U.S. and their relationship with us.
Many Republicans also fear the economic implications of raising debt, arguing that raising the debt will be dangerous for our future. However, this claim is false. The national debt has accumulated over the years due to spending on healthcare (i.e. Medicare and Medicaid), social welfare, education, and the military. These expenditures provide our population with much needed social services. By investing in these programs, our government invests in building a stronger economic environment for future generations. This will enable future generations to pay off our debt, especially if the government progressively taxes businesses and citizens.
In fact, Republicans have opposed progressive taxing for decades, which has contributed to a rising national debt. Ronald Reagan, George W. Bush, and Donald Trump all lowered taxes for the rich and large corporations while increasing funding for the Department of Defense. Ironically, although the Republican party argues against amassing debt, Republican presidents have only made our debt problem worse.
In the midst of a raging pandemic, the Biden administration has proposed a massive infrastructure plan. According to the New York Times, this may raise the national debt by more than two trillion dollars. Once again, Republicans are outraged by this huge spending. However, as we see with previous spending bills, passing this bill will likely stimulate the economy. Biden’s Build Back Better plan is projected to create ten million clean-energy jobs, and the president has also expressed interest in improving our nation’s education system. According to the Economic Policy Institute (EPI), every dollar spent on improving educational facilities, generates one and a half dollars in economic value.
While national debt will certainly grow with increased spending, supporting America’s social services and rebuilding our infrastructure are worth the cost. Americans should no longer worry about our increasing debt. Instead, they should worry about what they get in return. If the country puts borrowed money to good use, it will prosper.
A Republican senator presents an infrastructure plan.
Presidents who increased the national debt in the last 40 years