How are we dealing with the national debt?

[Antoneo]

The US government's debt of course.
How can all of this increased borrowing and spending can go on... will we ever pay back the huge debt? Is the reason behind this because the government can simply refinance their debts over and over, print money, and simply raise taxes when needed?

 

[aznmist]

is there a country that's not in debt...?

 

[Harvey]

Watch out.... Here it comes.... the "D" word!!![/i]....
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DUU-u-u-uH!!!!

Now, convince the weird guy in the driver's seat which way this bus is headed.

 

[Atrail]

We are Americans, We specialize in debt

 

[FoBoT]

it doesn't need to be paid back
much of the paper that makes up that debt is held by the retirees in the US, if you pay them off, where will they put their savings? the interest rates for long term paper would drop to the floor, your grandparents would have to eat cat food, you want that?

we are basically paying our grandparents retirement indirectly through taxes/interest payments on the national debt

 

[Atrail]

BTW If you do a search on National Debt, you will find lots and lots and lots of threads... Archieved

 

[Antoneo]

Ok so my understanding of economics sucks ::sigh:: and I need to use search more often.

 

[Anubis]

we are making it bigger

 

[Siva]

why deal with it? its not hurting anyone, and a constant national debt is healthy. why waste our own money paying ourselves back for something we never really owed anyone?

 

[SuperTool]

Originally posted by: Siva
why deal with it? its not hurting anyone, and a constant national debt is healthy. why waste our own money paying ourselves back for something we never really owed anyone?

You do owe it to the bondholders. US government and US citizen's property is colateral for the US national debt. And it does hurt us, because we pay 10% and growing of US government budget to pay interest on the debt. That comes out of our taxes. Saying that it doesn't hurt anyone is like saying credit card debt never hurt anyone.
Unfortunately it's no longer possible to pay down the national debt because Bill Clinton cannot run for president again.
As it stands now, the republicans bust the budget by lowering taxes, and both parties are busting the budget by out of control spending and pork.

 

[Harvey]

FoBoT -- Man, did you just fail Econ 101.

 

[PsychoAndy]

Originally posted by: FoBoT
it doesn't need to be paid back
much of the paper that makes up that debt is held by the retirees in the US, if you pay them off, where will they put their savings? the interest rates for long term paper would drop to the floor, your grandparents would have to eat cat food, you want that?

we are basically paying our grandparents retirement indirectly through taxes/interest payments on the national debt

you need a healthy dose of what intelligent people call REALITY

where are you getting these purported "facts"?

the paper that uncle sam writes to pay for everything comes from debt securities. LOTS of debt securities. savings bonds, certificates of deposit, t bills. the interest paid on the principal is staggering, as well as the entire debt itself.

in fact, it is so staggering, if we paid back the entire national debt immediately, theoretically the huge influx of money would:

A. cause the bottom to fall out on interest rates. supply and demand, fixed amount of $ available, demand to use said $. interest is the amount charged to use said $. if ton of it is available, and there isnt enough demand, interest rates drop and wreak havoc on the wonderful balance greenspan has created
B: Cause our currency to devaluate. Thats not always a good thing.
C: Inflation stemming from currency devaluation.
D: Create anarchy everywhere, and have the russian people start laughing at us.

ok, well maybe not D, but the point is the national debt serves a sort of purpose. that much money is acting as sort of a balance for interest rates. it lends some control to the money supply and essentially acts as a really expensive government economy stabilizer.

somebody tell me if i have a point or if my 101 fever is coming back.

 

[crobusa]

This is a damn good question, now that the economy has turned sour and 9/11.

We were paying it off (reverse bond auctions) on the 30-year bonds. This skewed the interest rates, so Wall Street looked to 10 years, and private debt to create a "risk-free" interest rate index. After the billions that "vanished" out of projections with the downturn, and the billions in the name of national security, the government subsidies.

The libertarian movement argues that the federal debt sucks needed liquidity away from borrowers, creating higher costs for starting business. Like a balloon, Adam Smith's "Invisible Hand" says a subsidy and an unintended affect on other people.

The thing as a 19 year old that scares me is that the Trust Fund will be bankrupt by the time I become old enough to get paid back the money I put into the system. SS's Trust fund is completely in government debt now earning a whopping 1% Rate of return (this is the government paying itself, it guarantees alot more to seniors.) Should we count SS as part of the debt? The Generally Accepted Accounting Principles (GAPP) say yes if it's a private business, but the government make the rules it wants.

Not to mention 90% of our debt is owned by foreigners during a flight to quality, nothing is as stable than US gov debt, (Even Bin Laden owned some to finance his terror operation.)

To summarize... bah.

My only hope now is that the next generation when it comes to power realizes the concept of self-interest, and abandons the entire SS system like almost all big governments, rather that pay 90% in social security tax.. but by that time I'll be relying on the money to get my monthly shot glass of Jack Daniels.

 

[Cyberian]

PsychoAndy -

Just say the gummint paid the debt back over 20-25 years. Would all those bad things still happen??
(Leave out 'D' for this exercise.)

 

[crobusa]

My response to PsychoAndy's comments..

1. cause the bottom to fall out on interest rates.

A bit of an exaggeration, but interest rates would fall as more money would be available to be lent.

Cause our currency to devaluate

More extreme again.. The US would be a more competent borrower. If you were a credit card company, would an account that was paying off its debt be worth more or less to you? More investment into the US economy would flow because the US dollar would be more attractive

C: Inflation stemming from currency devaluation

99% of inflation comes from too many people chasing too few goods. The price gets bid up by the newly affluent. 1-2% inflation is agreed to be healthy. The scenario you describe is exactly that happened when Argentina defaulted on its debt, not the case here

D: Create anarchy everywhere, and have the Russian people start laughing at us.

ROFL, you are nuts. Unfortunately Russia is cannibalizing its infrastructure, stealing telephone wire to sell for scrap. In Afghanistan, people are disarming bombs for the metal.. You can't dream of tomorrow, or laugh at others when you can't eat today.

 

[Shantanu]

Where the hell are you going to get all that money to pay off the national debt instantaneously? If you taxed people that much in one year, the economy would collapse. Having some national debt is healthy. Bonds are useful in the financial markets, for controlling interest rates and such. The best course of action is to make sure the national debt does not grow. Inflation will effectively trim it down over the years. Perhaps there should be a Constitutional amendment that caps spending, etc.

 

[exp]

will we ever pay back the huge debt?

Sure. We'll pay it back when other countries pay their debts to us.

 

[crobusa]

Sure. We'll pay it back when other countries pay their debts to us.

Heh, a cynic woud say the American revolution was a way to get rid of it's debt to England, and freedom was a bonus.

 

[PsychoAndy]

Originally posted by: Cyberian
PsychoAndy -

Just say the gummint paid the debt back over 20-25 years. Would all those bad things still happen??
(Leave out 'D' for this exercise.)

Interesting theory. I'm not too sure, but probably not. I spent a little too much time reading about the "what would happen when the US government pays back debt" chapter of my friends econ textbook. what it said was that any reduction in the debt per se, would cause a reduction in interest rates (and as low as they are NOW, thats not a safe thing).

Now, if the government paid back the debt over that much time, then probably all those things wouldnt happen. I was just thinking about what if we DID pay the entire debt back at one time. granted, they are at an extreme, but thats probably whats gonna happen when you burn thru 6 trillion overnight. the debt can be managed, but its gonna happen over a long period of time to avoid any economic instability.