Public Debt Why Private Debt Is The Bigger Problem Essay

Public vs. Private Debt: Why Private Debt is the Bigger Problem, and how it got So Out of Hand Much of the rhetoric regarding growing American debt and its detrimental effects focuses on public debt—government debt acquired through deficits and government borrowing. The clear concern many have regarding public debt is not undue; with that said, it is worth noting that usually government debt, and even consecutive deficits—if managed correctly—are relatively benign. Particularly when compared to the much more harmful and far less scrutinized form of debt, private debt—debt that is accumulated by private citizens and corporations through credit cards, mortgages, student loans, corporate loans, etc. It is time private debt and the multitude of reasons it is a cause for concern are discussed more widely. Public debt in the United States is in the region of $18 trillion and a little over 100% of GDP. Private debt on the other hand is in excess of $40 trillion—more than double—and more than 220% of GDP. Public debt is vexatious, but it is unlikely to precipitate a complete collapse of the American economy. Moreover, the sharp increase in public debt since the 2008 recession is within reason. The 2008 recession caused the loss of millions of jobs, which in-turn resulted in two notable effects—a reduction in government revenue due to diminishing tax receipts, and an increase in government spending due to an increase in unemployment. This exact paradigm occurred in virtually allShow MoreRelatedThe Debt Problem For Spain Essay1710 Words   |  7 PagesThe debt problem for Spain, however, is not entirely only a problem for the government. In fact, most of the debt burden is on households, and non-financial corporations, which together with non-profit organizations (negligible) make up the total value of the private sector debt. 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