Slower economic growth and higher interest and inflation rates are two main reasons why some economists believe that the U.S. National debt will create problems for the U.S. economy in the long term. Economists Camern Reinhart, Vincent Reinhart, and Kenneth Rogoff examined over 110 years of economic data and concluded that “advanced economies whose debt levels reach 90 percent of GDP face much slower economic growth.” The economy grows at low interest rates, so obviously high interest rates have the opposite affect. When interest rates are high the supply of loanable funds shifts in therefore it is harder for people to borrow. Higher inflation will raise the prices of everyday necessities, making it difficult for those who live on a fixed salary to buy anything more than what they need. If the economy is not growing then more people are getting laid off, there are less job opportunities and wages will be decreasing. The Congressioanl Budget Office predicts that, “interest costs on the debt will more than double before the end of the decade, rising from 1.4 percent of GDP in 2013 to 2.9 percent as …show more content…
Two reasons why debt is unlikely to cause problems is because debt is only a problem if you can not repay it, and the government has no problem borrowing. Scott Brown of Raymond James says, “ There is no magic level of debt that gets an economy in trouble.” Like I previously stated, if interest rates are low then the economy will grow. The FED can create new money by buying Treasury Securities. Since interest rates have remained relatively low, it is most likely that the FED will continue to create new money. Myles Upland also states, “ the US can literally print the money it needs to repay its debt, and it still maintains a high credit rating.” Therefore it is questionable if the U.S national debt is unlikely to cause