How Deep Are We in Debt?
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Wednesday, September 4, 2013

How Deep Are We in Debt?

The US national debt is over $16 trillion and counting. The figure has more than quadrupled over the past two decades. While there is no need to panic over the federal government's being in debt. The public indebtedness does have serious implications for the financial sustainability of individual households as well as the overall health of our economy, when its size gets alarmingly big as compared to the country's Gross Domestic Product (Debt to GDP is estimated to be 101.60% in 2012).

The federal government may reduce its deficits by cutting spending, raising taxes, or printing money. None of these measures however, would leave everyone in the nation unscathed. And low-income families are more likely to get hurt by inflation and budget cuts in welfare programs.


High levels of national debt would lead to higher interest rates, which in turn would impact the consumer market through loans, mortgage and credit cards. According to a recent Washington Post article, mortgage debt accounts for three quarters of all household debt and the majority of debt reduction in the private sector occurred in mortgage debt and home equity loans in the past year. This could be due to some families paying off their debt, some having to give up their home for foreclosures or short sales, and others simply choosing not to buy a home at all.

Please check out this infographic if you'd like to learn more about US national debt and how it may affect indebtedness at the household level.

Disclosure: I will be compensated for this publication. All views and opinions expressed are my own and may differ from yours.


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