While COVID-19 has affected every aspect of our lives, a key source of the pandemic’s torment is demonstrated in the economy where unemployment has soared. To offer a sense of stability, the government continues to inject money in an unprecedented manner. However, with these short-term solutions come long-term problems. The pandemic has not only created economic issues of increased government spending but exposed existing ones such as a ballooning national debt that younger generations will be forced to deal with.
An increasing national debt presents the danger of a collapsing economy. A common way to measure the national debt is to look at it as a percentage of our GDP. Through this lens, the national debt has grown at a worrisome rate. In 1990, it was 54% of our GDP; in 2010, it was 91.2%; in 2019, it was 106.9%; in 2020, this number could rise to 150% as a result of heightened spending. Although this issue is not an immediate one as low-interest rates allow for debt servicing to be completed at a low cost, “when a nation has high debt and its interest rate is high, there will be an issue,” says Tim Kendrick, a Latin School of Chicago Economics teacher.
In addition to a ballooning debt, increased government spending will present economic growth issues in the future. Current expansionary policy is displayed through a recent Congressional Budget Office report that projects if current policies remain, federal spending will grow from an average of 21.3% of GDP from 2010-2019 to an average of 29.3% from 2041-2050. Tom Mazza, a Principal Investor at Metolius Capital, explains a danger of increased spending: “In terms of long-term impact, we certainly have moved forward a lot of the increase in GDP that would have happened in x years from now. So it is a good thing for people now, not so good in the future as growth will slow.”
An increasing national debt and government spending policies present a danger to future generations—one that we must be aware of.