The Federal government's total outstanding debt is quickly approaching $21.5 trillion. Debt held by the public (that is, not including the debt owed to government trust funds like Social Security) is now almost $15.8 trillion. The debt totaled $475 billion forty-four years ago when Congress passed the law regulating how the federal government budgets - the Congressional Budget Act. Since then, it has increased from 31percent of the economy to 104 percent.
Incentives to Borrow
Debt takes advantage of our tendencies towards loss aversion. The government raises money by issuing bonds that it promises to pay, with interest, in the future after some period of time. It is clear that the public has become more accepting of this practice, even in peacetime. Public acceptance reflects a belief that lending the government money is a good investment strategy (which is correct when the net present value of the bond is more than the taxes paid). People who inherit the bonds are no better, or worse, off in the deal as long as debt today equals taxes tomorrow.
