Question

What are two factors that can increase the national debt?

Answer 1

The national debt can increase due to government borrowing to fund expenditures and by rising interest payments on the debt. Interest on debt grows as the debt increases, and higher interest rates can further exacerbate the situation by increasing financing costs.

Step-by-step explanation:

Two factors that can increase the national debt are government borrowing and the cost of interest payments on the existing debt. Governments often need to borrow funds to cover public services and other expenditures when their current revenue is not sufficient. This borrowing is typically done by selling

Treasury bonds, notes, and bills. Additionally, as a nation's debt grows, so does the category of government spending known as interest payments. These payments are essentially the cost of borrowing money, and they increase automatically as the debt increases, having a self-reinforcing effect on the national debt. Over time, large interest payments can pull resources away from investments in human and physical capital that are essential for economic growth.

Rising interest rates pose another risk; they lead to higher costs of financing government debt. This scenario can compel governments to implement spending cuts and tax increases to reduce budget deficits, decisions that may be politically controversial and also tend to have a contractionary effect on the economy.

Answer 2

As you probably know, when Bill Clinton left office, the budget was in surplus and both the White House and the Congressional Budget Office projected that the external U.S. debt would be completely repaid by about 2010. Instead, we're more than $12 trillion dollars worse off.