What is the biggest contributing factor to the overall debt in the United States?

The United States is currently facing an unprecedented level of debt, with the national debt surpassing $28 trillion as of 2021. The question of what is the biggest contributing factor to this debt is a complex one, with a variety of factors playing a role. However, there are a few key contributors that stand out as particularly significant.

Government Spending

One of the biggest contributors to the overall debt in the United States is government spending. The federal government has been spending more than it takes in for decades, leading to a steady accumulation of debt. This spending is driven by a variety of factors, including entitlement programs like Social Security and Medicare, defense spending, and interest on the existing debt.

Tax Code

Another major contributor to the debt is the tax code. The current tax code is incredibly complex and riddled with loopholes, which allows many wealthy individuals and corporations to avoid paying their fair share of taxes. This means that the burden of paying for government spending falls disproportionately on the middle class, who are often left with less disposable income to save or invest.

Monetary Policy

The Federal Reserve’s monetary policy is another key contributor to the overall debt in the United States. The Federal Reserve has been engaged in a policy of quantitative easing since the 2008 financial crisis, which has led to a significant expansion of the money supply. This has helped to fuel economic growth, but it has also led to rising inflation and interest rates, which has increased the cost of servicing the debt.

Credit Cards

Credit card debt is a significant issue among young Americans, with many struggling to pay off large balances. The average credit card debt for Americans under 30 is around $3,000 and this number has been increasing over the years. The ease of access to credit cards, combined with a lack of financial education, can lead to young people accumulating large amounts of debt at an early age. This can have long-term consequences on their credit scores and financial stability.

Based on this article, financial organizations have started to notice this issue and are trying to implement new ways they can help young adults benefit from what options are available to them. However, many bad actors and predatory practices have managed to slip through the cracks, tarnishing the overall effort.

Aging Population

Additionally, the aging population is also a major contributor to the overall debt in the United States. As the population ages, the cost of entitlement programs like Social Security and Medicare increases, putting a strain on the federal budget. This demographic shift is also likely to lead to a decrease in the labor force and slower economic growth, which will make it more difficult for the government to generate the revenue it needs to pay down the debt.

Trade Deficit

The overall debt in the United States is the trade deficit’s fault as well. The United States has been running a trade deficit for decades, which means that it is importing more goods and services than it is exporting. This trade deficit is driven by a variety of factors, including a strong dollar, low savings rates, and a lack of investment in domestic manufacturing. This trade deficit is also leading to the loss of jobs, which is making it difficult for many Americans to make ends meet.

Healthcare Costs

Finally, the high cost of healthcare is also a significant contributing factor to the overall debt in the United States. The United States spends more on healthcare per capita than any other country in the world, yet it has some of the worst health outcomes. This is largely due to the high cost of drugs, medical procedures, and administrative costs. High healthcare costs are also a major burden on businesses, which often pass the costs on to consumers in the form of higher prices or reduced benefits.

Final Thoughts

In conclusion, the overall debt in the United States is a complex issue with many contributing factors. Government spending, the tax code, the Federal Reserve’s monetary policy, aging population, trade deficit and high cost of healthcare are the major factors that contribute to the overall debt in the United States. While it is unlikely that any single policy or action will be able to completely solve the problem, addressing these key contributors can help to slow the rate of accumulation and put the country on a more sustainable fiscal path.