The Current Problem of the US Government Debt in the Context of Socioeconomic Inequality Regulation

Global debt has risen dangerously since the early 2000s, but most governments and central banks are more supportive of investors, because they keep printing money and buying back financial assets to provide markets and economy with liquidity. In this regard, we can see increasing concern not only about the growing debt burden of the world economy, but also about the impact of this problem on the dynamics of economic inequality. The aim of the work is to analyse and clarify the relationships between public debt and economic inequality in the USA for the period of 1910-2018. This study concludes that the level of economic inequality is not directly related to the specific level of public debt and changes under the influence of other factors, such as taxes and government spending on combating poverty, financed by the new government debt. Modern financial policies lead to increased economic inequality in wealth, which is confirmed by the data for most countries. In many developed countries, there is a progressive taxation system that curbs the rising income inequality. However, in most of them, there are complex tax relief and deduction systems for long-term investors, the problem of offshore and tax avoidance remains unresolved, which creates great obstacles to solving the problem of the growing economic inequality. In the context of the galloping inflation of financial assets, the growth rate of labor income is guaranteed to be lower than the growth rate of investment income. In the recommendations, the author justifies the modern problem of the public debt growth. The main risk in addressing this problem in the context of economic inequality regulation is the risk of increasing intergenerational economic inequality. We see how the tax burden is being transferred to future generations, while modern taxpayers have better opportunities to improve their quality of life, accumulate adequate pension capital and generally live with a higher level of financing of public goods. All this may not be the case for future generations of taxpayers due to the likely exacerbation of the debt problem in the future, since they will either have to pay more taxes on their income, pay a high inflation tax, or go to reduce public spending and finance public goods to solve the “unsolvable debt problem”. In this regard, the main recommendations today are to make every possible effort to contain the growth of public debt to a rate no higher than the growth of the economy; to develop a system of fiscal regulation of investor wealth and investment income; to optimize inheritance taxes; and, of course, to continue solving the problem of tax avoidance and offshore.

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