Public Debt in the United States: Its Causes and Economic Significance

Seminar paper from the year 2012 in the subject Business economics - Miscellaneous, grade: 1,3, Reutlingen University, language: English, abstract: A nearly consistent trend of soaring deficit spending in order to 'bridge the gap between tax revenues and spending outlays' (Cashell, 2010) resulted in a tremendous accumulation of public debt in the United States over the last decades. Public debt, defined as 'the external obligations of the government' (OECD, 2001), has a major effect on an economy's development. As the U.S. public debt is increasingly seen as 'hold[ing] back growth' (Economist Intelligence Unit, 2011) and causing economic decline (Elliot, 2011), it is worth examining its causes and economic significance in the world's largest economy. This essay will examine the economic significance and influential factors causing the consistent increase of public debt in the United States. A discussion of future developments and recommended procedures is thus, beyond the scope of this essay. An assessment on the status quo will first be made on the basis of exogenous drivers in connection with its economic affects, followed by an examination of the potential internal factors of the problem.