Gone quicker than a 24-pack of TP... Remember that $349B in forgivable loans to small businesses from the $2T stimulus package? That ran out quickly — especially since not-so-small businesses got multi-million loans. Now Congress has approved an extra $321B for Paycheck Protection Program loans (PPP), which become "free money" for businesses if they keep their workers employed. All that free money though is adding up...
- $3.7T: That's how much the government expects to add to the national debt this year, aka its budget deficit. The previous record deficit? $1.5T in 2010.
- 110%: That's America's current debt-to-GDP ratio (like your personal debt amount vs. your annual salary, but for the country). US Gross Domestic Product is around $21.7T — the national debt is almost $25T.
The US borrows $$$ by offering IOUs to investors... They're called "Treasury securities", aka US government bonds. Most of that debt is held by regular Americans through pension and mutual funds and a large part is owned by foreign governments (think China).
- US debt is typically seen as a relatively safe investment — buyers are confident that America will pay them back, given the country's world-leading wealth, income, and economic resources. That low riskiness is reflected by the US' AA+ credit rating and helps explain why America pays barely any interest on its debt. But...
- Higher debt usually means higher interest rates. If investors think they might not get paid back, they might start demanding higher interest (higher risk, higher demanded reward).
- Tomorrow's generations will have to repay today's debts. But debt-financed government spending seems necessary to save the economy from the giant economic hole caused by the COVID-19 shutdown.