“The United States debt, foreign and domestic, was the price of liberty. The faith of America has been repeatedly pledged for it…Among ourselves, the most enlightened friends of good government are those whose expectations of prompt payment are the highest…” – Alexander Hamilton, 1790, First Report on the Public Credit.

We see a lot of headlines stating that national debt is a barrier for a growing economy, or we hear a lot of warnings about what is going to happen if our debt grows. What is national debt? National debt is the total financial obligations of the central government of a nation, usually in the form of interest-bearing government bonds, called also public debt.

There are two types of debt: internal and external debt. Internal debt is the amount borrowed from sources within the country. The government raises this money by selling securities, government bonds and bills. External debt is the money borrowed from foreign sources such as private sources, other countries, and the International Monetary fund.

Going back in time, we can see that national debt is a “deja vu” for the United States of America. Public debt is a fact of life. The U.S. was born in debt. At its initial stages, the Continental Congress lacked the power to tax.

In order to pay for goods, the Congress printed money, but the currency – known as Continental – collapsed. As a result, cash was raised by borrowing money from different foreign countries and domestic creditors. For those purposes, the U.S. Treasury Department was created (1789).

“A debt that has grown over the last decade, primarily as a result of two wars, two massive tax cuts, and an unprecedented financial crisis, will have to be paid down,” President Barack Obama explained in his speech (Boyer).

If we go back in time, we can see that each president inherited the debt and then added more. However, presidents may deny that it isn’t their debt – but somebody has to pay. It is like moving into a new house that is being remodeled every time and saying that you are not going to pay the mortgage.

Over the last decade, the largest portion of all new spending comes from Social Security, healthcare and interest on the increasing debt. Right now, America faces the lowest interest rates ever. The other portion of the debt was borrowed from governments, corporations and individuals from foreign countries.

I think the United States of America still has one of the strongest economies in the world. The country’s deficits or debt are caused by the recession and slow recovery. Seventy-one percent of the U.S. debt is held by agencies of the federal suit, other U.S. institutions and private individuals. The other 29 percent is held by foreign parties. Taking everything into account, we should get on the right path of prosperity, job creation and rising incomes. National debt is important, since the future of the United States is at stake and the impact of American economy in the world is colossal.

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