The Analysis of the Way and Impact of US Reducing the National Debt Scale

Since the financial crisis in 2008, the absolute scale of US national debt and its proportion of GDP have risen up to the highest level after World War II. Excessive debt will reduce the ability of the United States to cope with the economic crisis, damage the sovereign credit of the United States, increase the burden of interest rates, and aggravate the deep structural problems of the economy of the United States. Therefore, it is necessary to reduce the debt scale. Having compared the three methods of reducing debts and established an intergenerational budget constraint model under general equilibrium conditions to evaluate the feasibility of debt reduction through inflation in the United States, this paper concludes that moderate inflation will be a feasible way to reduce debt in the face of political pressure. However, due to the factors that the economic growth of the United States may decline in the future, the fiscal discipline may be weakened and the interest rates on public debt may rise, there are still major challenges to the sustainability of US debt in the future. Therefore, investors in US national debt should pay close attention to it and not overstate the effect of inflation on US debt reduction.