Our growing debt also has a negative impact on the incomes and economic opportunities available to every American.
When high levels of debt crowd out private investments, businesses utilize fewer assets, which translates into lower productivity and, therefore, lower wages. On the other hand, reducing federal borrowing has positive effects; according to CBO, income per person could increase by as much as $6,300 by 2050 if we were to reduce our debt to 79 percent of the size of the economy by that year.
In addition, higher interest rates resulting from increased federal borrowing make it harder for families to buy homes, finance car payments, or pay for college. Fewer education and training opportunities stemming from lower investment would leave workers with fewer skills to keep up with the demands of a more technology-based, global economy. Faltering support for research and development would make it harder for American businesses to remain on the cutting edge of innovation, which would hurt wage growth. Furthermore, slower economic growth would have a negative compounding effect as lower incomes lead to smaller tax collections, which put the federal budget further out of balance, making our fiscal challenges even worse.
