What was the effect of the national debt?

Answer 1

The size of the US's national debt is a vital piece of the economical health of not only the USA but of all nations participating in world trade and economics. I'll focus on the USA's national debt. Generally speaking a small national debt helps the USA's economy in a few ways. Based on the USA's position in the world as a major player in world economics and yes, it's military strength, a small national debt means that taxes in the USA, whether income taxes or other Federal taxes, need not be raised to pay the principal and interest of the national debt. Another positive feature of a small national debt is that the USA can issue bonds on the free market to raise money in a smooth manner as the small debt is one indicator that the USA's finances are in good order. This also directly affects the amount of interest that Government bonds need to pay the buyers of Government bonds. The USA's ability to help the economies of other nations is enhanced when the USA can borrow funds to help their economies. Thus, the amount of foreign aid the USA can lend or grant to other nations for good reasons not frivolous ones, is increased.