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Paul Jeon
Ms. Bagley
ECON520
April 8, 2025
The Burden of Borrowing: Causes and Effects of Government Debt
Government debt, often called national or public debt, is the total amount a government
owes its creditors when it spends more than it collects in revenue. As of April 2025, the U.S.
national debt stands at approximately $36.2 trillion, raising concerns about its sustainability
(U.S. Treasury Fiscal Data). This paper examines the primary causes of government debt—
budget deficits, economic crises, and rising healthcare costs—and its effects, including higher
interest rates, slower economic growth, and reduced fiscal flexibility. Through this analysis, it
becomes clear that unchecked government debt threatens long-term economic stability and
burdens future generations.
One major cause of government debt is persistent budget deficits. When a government’s
annual spending exceeds its tax revenue, it borrows to cover the shortfall. The Treasury Direct
Kids website explains this simply: “If the government spends $3 trillion but collects only $2
trillion in taxes, it must borrow $1 trillion” (Treasury Direct Kids). Economic crises amplify this
problem. For example, during the COVID-19 pandemic, U.S. spending surged by nearly 50%
from 2019 to 2021 to fund relief efforts, pushing the debt higher (U.S. Treasury Fiscal Data).
Rising healthcare costs also play a significant role, especially in the U.S., where the
Congressional Budget Office (CBO) predicts federal spending on Medicare and Medicaid will
rise from 5.8% of GDP in 2025 to 8.1% by 2055 (CBO). These factors—deficits, crises, and
healthcare—drive debt accumulation over time.
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The effects of high government debt are equally concerning. First, it can lead to higher
interest rates. When governments borrow heavily, they compete with private borrowers, driving
up borrowing costs. The Balance notes that this “crowding out” effect makes it harder for
businesses to invest, stunting growth (Kimberly Amadeo). Second, excessive debt may slow
economic growth. A World Bank study cited by The Balance suggests that when debt exceeds
77% of GDP, each additional percentage point reduces growth by 0.017 points (Amadeo). For
the U.S., with debt at 100% of GDP in 2025 and projected to hit 118% by 2035, this is a pressing
issue (CBO). Finally, high debt reduces fiscal flexibility. As interest payments grow—reaching
$881 billion in 2024 and projected to hit $1.8 trillion by 2035—less money is available for
schools, roads, or emergencies (CBO). These effects highlight the risks of unchecked borrowing.
In the U.S., these causes and effects are starkly visible. The national debt, now $36.2
trillion, reflects decades of deficits worsened by tax cuts, wars, and recent pandemics (U.S.
Treasury Fiscal Data). With debt held by the public at $29 trillion, or 100% of GDP, the CBO
warns of rising interest costs and potential economic slowdowns if trends continue (CBO). While
some argue debt fuels growth during crises, the long-term costs—higher rates, slower growth,
and limited options—suggest a need for balance. Personally, I believe this tradeoff matters:
borrowing today shouldn’t saddle tomorrow’s taxpayers with unmanageable bills.
In conclusion, government debt stems from deficits, crises, and healthcare costs, leading
to higher interest rates, slower growth, and less fiscal room to maneuver. The U.S. case shows
how these forces play out, with a debt trajectory that demands attention. Managing this burden
requires tough choices—raising revenue or cutting spending—to protect economic stability and
future generations. Without action, the weight of debt could become a crisis of its own.
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Works Cited
Amadeo, Kimberly. “What Is the Public Debt, and When Is It Too High?” The Balance,
31 Mar. 2025, www.thebalancemoney.com/what-is-the-public-debt-3306294. Accessed 6 Apr.
2025.
Congressional Budget Office. The Budget and Economic Outlook: 2025 to 2035. CBO,
Feb. 2025, www.cbo.gov/publication/60870. Accessed 6 Apr. 2025.
U.S. Department of the Treasury, Bureau of the Fiscal Service. “Debt to the Penny.”
Fiscal Data, 4 Apr. 2025, fiscaldata.treasury.gov/datasets/debt-to-the-penny/debt-to-the-penny.
Accessed 6 Apr. 2025.
U.S. Department of the Treasury. “Government—How Does the U.S. Government
Borrow Money?” TreasuryDirect KIDS, www.treasurydirect.gov/kids/borrow/borrow.htm.
Accessed 6 Apr. 2025.
