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The National Debt, Explained: Yikes

We hear a lot about the national debt. In the United States, the government knows way more than $20 trillion. Yikes. And while this number is huge and scary, and more money than any of us – even Jeff Bezos and Bill Gates – will ever see in our lives, it doesn’t matter that much.

The national debt is usually rising

The government always spends more than it takes in, and that speaks volumes about our problem. We have a difference between what we owe and our economy’s size: GDP or gross domestic product. If the ratio between what you owe debt and GDP is upside down – like it is here in the United States and around the world – that’s not great. Right now, our debt is way bigger than the size of our economy. And that’s worse than the Great Depression; the last time that ratio hit a peak was way back after World War II. 

How did this happen? 

Since 1945, we’ve had 10 recessions. Whenever there’s a recession, the government spends loads of cash trying to stimulate the economy – exactly like they’re doing right now with stimulus checks, extra unemployment benefits and bailouts. These things are necessary, but we’ve added a couple of trillion dollars to our debt in the last year alone.

And you would think once the economy recovers, people will go back to work, and it would all work itself out. It would … But we keep on having recessions. The government keeps on spending more money on military and social programs while they’re cutting people’s taxes, and health care spending keeps on skyrocketing. 

So what does this mean for us? 

Watch out next tax season: Taxes will have to keep on going up to keep up with this issue and not just for the rich and large corporations like some lawmakers promise. So maybe you put that stimulus check aside because you might need it later to pay off the government. 

Are you worried about the national debt and the government constantly being underwater? Let us know in the comments below.

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