$40 Trillion Debt: A Growing Concern for the US Economy

The US national debt is projected to reach $40 trillion by the end of the year, surpassing the country's GDP. This milestone has sparked debate among economists about the impact of the national debt on Americans.

Tom Hoenig, former chief executive of the 10th District Federal Bank and former vice chairman of the Federal Deposit Insurance Corporation, believes the national debt hurts everyday Americans by contributing to inflation and higher interest rates while slowing economic growth. 'The concern with the debt is not that you necessarily have a crisis, it's that you slowly undermine the growth of your economy,' he said.

L. Randall Wray, a senior scholar at the Levy Economics Institute and leading proponent of Modern Monetary Theory (MMT), disagrees. MMT argues that governments that mint their own currency, like the US, hold no risk of defaulting on their debt because they can always issue more currency to meet their obligations. Wray believes increasing spending in targeted areas would stimulate the economy enough to increase revenue and eventually bring down the debt.

Hoenig argued that the national debt has compromised monetary policy and made it an enabler of running large debts. He also stated that when the US went off the gold standard in 1971, it took away an external discipline on both Congress and the Federal Reserve, leading to increased debt and inflation.