America’s national debt has now surpassed $31 trillion

[Meghan54]

Thankfully, almost all that debt is owned by the US. Last figures I saw put foreign owned US debt at $7.5T.

The rest of the debt we owe to ourselves. Thankfully.

 

[dullard]

After all, that debt servicing is overwhelmingly us paying money to ourselves. Why would that be an issue?

Are you seriously arguing that money transfer from one group of people to another group of people is not an issue? Seriously? Have you paid attention to politics of any country for any period of time in any of the history of the world? Transfer of money from one group to another is probably the biggest source of political strife that I can think of (behind religion). Ignoring foreign held debt, one could argue that interest payments are just shifting money from one US pocket to another US pocket. But, if you happen to be one of those US pockets where the money leaves (i.e. a taxpayer) then in many cases people do care and they do consider taxation, spending, wealth transfers to be a very significant issue.

National debt in of itself is not a problem. Countries need debt for day-to-day operations, to finance large projects, and for buffers against significant disturbances (wars, famine, pandemics, etc). Imagine if we had a zero-debt policy and a country attacked us, would we just sit back and say, "well, we lose since we can't go into debt to fight back". You are essentially making a false dilemma fallacy. We have more choices than (a) zero debt and (b) our current path of increasing debt for the entire foreseeable future.

Unsustainable national debt is a problem though. You are partially correct that an aging population is a big portion of that problem. As the baby boomers go from being primarily tax payers to primarily tax recipients, this debt is going to go up significantly. But, if you read the GAO report that the OP's graph comes from, there is much more to the story. The unsustainable portion is actually the interest being paid. We could handle the aging population without much change to our taxes or spending. But the interest portion is currently unsustainable and is leading to that massive increase in debt/GDP predicted in the OP's graph. That will require changes to our taxes and/or spending to address.

 

[Brovane]

You said the BOJ and Japanese trust funds - most of US bonds held by private US entities are in similar funds. Can you describe the difference here and the mechanism by which you think the US would run into problems with a similar debt/GDP ratio?

Bank of Japan holds 70% of Japenese debt. Sorry if that was misunderstood. US Fed holds about 20% of US Debt.

You appear to believe this allows Japan to have a debt/GDP ratio double ours without issue so you seem to think it's fine?

It apparently allows Japan to borrow at lower rates by having the Bank of Japan hold 70% of the Japanese debt. The US did the same thing over the last decade with Quantitative easing which reduced treasury rates and reduced mortgage rates.

If you think it's an issue can you describe in broad strokes when it will be? Again, Japan has double our debt/GDP ratio and this is clearly no issue.

This is what I'm talking about - people have this idea in their heads that sovereign debt is bad but when actually asked to describe why and what bad effects will follow they can't.

I said too much sovereign debt is bad, not that sovereign debt is bad. How much sovereign debt do you think is ok? 200% of GDP? 400% of GDP?

 

[fskimospy]

Bank of Japan holds 70% of Japenese debt. Sorry if that was misunderstood. US Fed holds about 20% of US Debt.

You said BOJ AND Japanese trust funds.

Regardless, can you describe the mechanism through which you think we will run into issues?

It apparently allows Japan to borrow at lower rates by having the Bank of Japan hold 70% of the Japanese debt. The US did the same thing over the last decade with Quantitative easing which reduced treasury rates and reduced mortgage rates.

So you're saying the US already does what the BOJ does, meaning we have a LOT of additional debt we can run up without issue. (Japan is still increasing their debt/GDP ratio without issue)

I said too much sovereign debt is bad, not that sovereign debt is bad. How much sovereign debt do you think is ok? 200% of GDP? 400% of GDP?

Sure, those all seem fine to me. If you think they aren't fine again I would be interested to know what negative effects will follow and when. (broadly speaking) People usually say 'Greece' but as I mentioned before Greek debt was very much like household debt as it was in currency they didn't control. If you control your own currency it's entirely different.

I get how people instinctively try to relate sovereign debt to personal debt but they have essentially nothing to do with one another.

 

[Brainonska511]

Implicit in most of these debt panic posts is that destroying the lives of tens of millions, mostly those on the lower economic rungs, is preferable to ever raising taxes. Indeed that is is somehow a moral imperative to do so.

I see you have been reading Felix's posts in the OT stock market thread.

 

[K1052]

I see you have been reading Felix's posts in the OT stock market thread.

I haven't but how bad could it....*checks thread*....oh ah I see.

 

[NWRMidnight]

Actually, when Trump was running things America printed then spent money like a drunken sailor (no offense to drunken sailors).
Those Trump tax cuts cost a lot and all that debt was charged to the national debt bill.
So, you can not blame democrats.
Trump, like GW Bush, knows that you can spend and spend and ignore the consequences because they can simply slip the bill to the middle class taxpayer. It worked before....

You forgot.. and blame it on the next Democrat administration.

 

[Brovane]

You said BOJ AND Japanese trust funds.

Regardless, can you describe the mechanism through which you think we will run into issues?

One of the weapon's the FED uses to control growth in addition to interest rate increases or decreases is to buy US Treasury notes, this helps reduce long term interests rates. The ultra low mortgage rates the last couple of years was because of the FED doing this, quantitative easing. If the FED already holds large amounts of US Treasury notes to keep interest rates low as part of what it does normally then when the economy gets into trouble the FED will have issues having a impact of the economy by buying US Treasury notes because it is already doing this as standard policy.

So you're saying the US already does what the BOJ does, meaning we have a LOT of additional debt we can run up without issue. (Japan is still increasing their debt/GDP ratio without issue)

Do you subscribe to the school of Modern Monetary theory? You think countries that issue debt denominated in their own currencies won't ever default on their debt because they can simply print more currency as necessary?

 

[fskimospy]

One of the weapon's the FED uses to control growth in addition to interest rate increases or decreases is to buy US Treasury notes, this helps reduce long term interests rates. The ultra low mortgage rates the last couple of years was because of the FED doing this, quantitative easing. If the FED already holds large amounts of US Treasury notes to keep interest rates low as part of what it does normally then when the economy gets into trouble the FED will have issues having a impact of the economy by buying US Treasury notes because it is already doing this as standard policy.

I think we are going in circles here. So Japan can sustain a debt/GDP ratio of double ours and rising because their central bank buys a lot of their bonds, holding roughly three times the percentage of bonds that the fed does, and with no deleterious effects. If we got into trouble couldn't the Fed buy bonds until they owned ~70% of them just like Japan and be fine?

I mean we went through the entire 2010's essentially with people making similar arguments and they were wrong every time. Why is now different?

Do you subscribe to the school of Modern Monetary theory? You think countries that issue debt denominated in their own currencies won't ever default on their debt because they can simply print more currency as necessary?

By definition it is impossible to default on debts in a currency you control unless you choose to default. There can be levels of inflation that markets might treat as effectively similar to a default, but actual non-elective default is impossible. I mean how would you default on a debt denominated in BrovaneBucks?

This really isn't an MMT thing either - I'm not aware of any mainstream economic theory that thinks countries can default on debts denominated in their own currency. It's kind of nonsensical as an idea.

 

[Brovane]

I think we are going in circles here. So Japan can sustain a debt/GDP ratio of double ours and rising because their central bank buys a lot of their bonds, holding roughly three times the percentage of bonds that the fed does, and with no deleterious effects. If we got into trouble couldn't the Fed buy bonds until they owned ~70% of them just like Japan and be fine?

I am not sure if your assumption that the Japanese holding so much debt that no deleterious effect is true.

https://en.wikipedia.org/wiki/Lost_Decades

I mean we went through the entire 2010's essentially with people making similar arguments and they were wrong every time. Why is now different?

What argument was that?

I am old enough to remember in 1999-2000 when we briefly had a surplus and then GWB got elected and his tax cuts along with his wars started the US back into deficit spending again.

 

[fskimospy]

I am not sure if your assumption that the Japanese holding so much debt that no deleterious effect is true.

https://en.wikipedia.org/wiki/Lost_Decades

The lost decade is what CAUSED the run up in their debt, it was not a result of it.

Edit: In 1991 when the lost decades started Japan’s debt to GDP ratio was like 38%. It makes no sense to attribute those problems to excessive public debt.

What argument was that?

I am old enough to remember in 1999-2000 when we briefly had a surplus and then GWB got elected and his tax cuts along with his wars started the US back into deficit spending again.

People constantly argued debt and deficits would lead to some sort of debt crisis and/or other negative effects and they just didn’t happen.

I have trouble thinking of any circumstances where the US would want to run a budget surplus.

 

[Pens1566]

Yeah, so?

 

[manly]

Greece ran into debt problems because its national debt was denominated in a currency it did not control.

Japan's debt/GDP ratio is roughly double ours and Japan seems to be doing just fine. If what you're saying is the result of excessive debt when can we expect the effects you're talking about? Clearly we should be able to at least double our current debt/GDP ratio without difficulties?

Doing fine? Their economy has mostly stagnated since the late 1980s, and they have a huge demographics problem with no solution in sight (the obvious one would be immigration, but they are xenophobic). I'm not saying this is due to their staggering public debt, but it's not all rainbows and unicorns there.

For now, U.S. public debt is manageable and technically you never have to pay it off (see post WWII, basically the national economy grew so much that eventually the public debt shrunk in relation). But I wouldn't brush aside the long-term problem because Medicare doesn't appear sustainable. I'm not an economist so I don't know what the upper bound is, but I'd be nervous once we start approaching 200% federal debt to GDP.

 

[JEDI]

Yeah, so?

Your sig:
spidey07 The economy did really well under Bush. People want those good times back.

I can't believe Spidey's been banned since 2015. 😱

No more Spidey07?

https://forums.anandtech.com/members/spidey07.26217/ Joined: Aug 4, 2000 Messages: 65,476 last seen: Jul 16, 2015 :( I miss his posts. it usually contained good advice

forums.anandtech.com

🙁

 

[nickqt]

Oh, right. The Debt-Boogieman.

I guess it's time for this one to be rotated back in to the talking points list since the Republicans are on track to win the House and there is a Democrat in the White House.

Of course if Republicans control the House and White House in 2025, expect the Debt-Boogieman to recede yet again into the shadows as a generous tax cut to billionaires gets passed because the Debt-Boogieman only exists to prevent Democrats from passing bills that might help the poors.

Rinse, repeat, the sky is falling unless we cut spending to the poors and give rich people more money.

Just another conjuring phrase that means absolutely nothing to the people using it, except as an in-group identifier.

 

[Dave_5k]

I dislike national debt, but in fiscal terms I do not think this is a problem right now.

Nearly all of this debt is for interest rates that were locked in near 0%. Factor in the rate of inflation, and all the people holding those bonds are just giving* the US government their money.


*interest rates were horrible and inflation exceeded interest when they gave the US government the money. Nobody hid this information. It was always understood you give us $10, and we give you $8 back a while from now.

I would just note that the weighted average maturity of the US debt is only a bit over 5 years - a bit less than 20% is held in bonds (which have 10+ year maturity) - roughly as much is held in <1 year T-bills as in long bonds. So roughly 20% or more of the US debt is being refinanced this year (as all the budget deficit has to be newly financed as well) ~ at current vastly higher rates

Monthly Statement of the Public Debt (MSPD) | U.S. Treasury Fiscal Data

This dataset provides high-level information on the federal government’s outstanding debts, holdings, and the statutory debt limit on a monthly basis.

fiscaldata.treasury.gov