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How much national debt should the U.S. have?

halik

Lifer
Oct 10, 2000
25,708
1
0
I keep seeing these misconceptions flying around, so i figured this would be a good way to get a consensus.

How much national debt should the U.S. have any more importantly why/how did you get your answer
 

Genx87

Lifer
Apr 8, 2002
41,087
494
126
I prefer as little as possible. I dont have a min % of debt to GDP however. But I would like to see it halved if possible over the next decade. Put it down in the low 30's.

That however isnt going to happen, especially when SS and Medicare starts running deficits.

 

bamacre

Lifer
Jul 1, 2004
21,034
1
61
Zero. In fact with the coming SS and Medicare expenditures about to escalate, the government aught to have a savings.
 

andy04

Golden Member
Dec 14, 2006
1,000
0
71
Why should we have a debt in the 1st palce??? Do you mean how much is safe to take on before the ship sinks???

I guess that would depend on how much money we have... maybe in terms of gold and other reserves. I guess it would be like you have 500k in cash and investments and have a 400k home loan... right?
 

ProfJohn

Lifer
Jul 28, 2006
18,268
4
0
Very little.

But we are years and years away from that point. Even with the most fiscally responsible congress possible it would take decades to eliminate our debt.

The best we can hope for is a small deficit.
 

halik

Lifer
Oct 10, 2000
25,708
1
0
Alright, let me add to it - if you say as little as possible, why is debt bad?
 

bamacre

Lifer
Jul 1, 2004
21,034
1
61
Originally posted by: halik
Alright, let me add to it - if you say as little as possible, why is debt bad?
Debt in the general sense does not have to be bad. I would never support a forced balanced budget, because there could be times of emergency when it would be wise to run a temporary deficit.

But this is certainly not what we have today. Why is it bad? Because of interest payments for one. Wasted money. Malinvestment.
 

smashp

Platinum Member
Aug 30, 2003
2,444
0
0
Total Obligations By the FED is 50 trillion if you include all the liabilities such as SS and medicare.
 

Xavier434

Lifer
Oct 14, 2002
10,386
1
0
I want to see it lowered by quite a bit like most people do, but generally speaking it is not the debt's existence itself which bothers me. It is how we accumulated that debt and how we spent the borrowed money. There are many things which I believe is worth going into debt for assuming you have the right kind of plan put in place. I realize that's a very general statement, but I didn't feel like writing a book.
 

halik

Lifer
Oct 10, 2000
25,708
1
0
Originally posted by: bamacre
Originally posted by: halik
Alright, let me add to it - if you say as little as possible, why is debt bad?
Debt in the general sense does not have to be bad. I would never support a forced balanced budget, because there could be times of emergency when it would be wise to run a temporary deficit.

But this is certainly not what we have today. Why is it bad? Because of interest payments for one. Wasted money. Malinvestment.
Right, but it's interest payments vs. opportunity costs (taxing people). If the return on people keeping their tax money is greater than the interest on the debt, then it would be irrational to tax - the more debt you have, the more return you get on your $1 of taxes paid due to the additional risk from leverage.

Same way from a tax payer perspective, you can maintain a constant amount of debt and your return in the form of government services is greater than if government only uses taxes to finance themselves. It's really a questions of capital structuring much like any other company.
 

bamacre

Lifer
Jul 1, 2004
21,034
1
61
Originally posted by: halik
Originally posted by: bamacre
Originally posted by: halik
Alright, let me add to it - if you say as little as possible, why is debt bad?
Debt in the general sense does not have to be bad. I would never support a forced balanced budget, because there could be times of emergency when it would be wise to run a temporary deficit.

But this is certainly not what we have today. Why is it bad? Because of interest payments for one. Wasted money. Malinvestment.
Right, but it's interest payments vs. opportunity costs (taxing people). If the return on people keeping their tax money is greater than the interest on the debt, then it would be irrational to tax - the more debt you have, the more return you get on your $1 of taxes paid due to the additional risk from leverage.

Same way from a tax payer perspective, you can maintain a constant amount of debt and your return in the form of government services is greater than if government only uses taxes to finance themselves. It's really a questions of capital structuring much like any other company.
I don't disagree, but the positive or negative result depends on what the taxpayers do with the money they keep, and on what government is spending money.
 

BigDH01

Golden Member
Jul 8, 2005
1,633
73
91
Originally posted by: halik
Alright, let me add to it - if you say as little as possible, why is debt bad?
Excessive debt is bad. We still have to pay interest on that debt. While this interest may be good for those that hold the notes, at some point the interest becomes unsustainable. If debt keeps growing at astounding paces, interest will consume a far greater percent of federal spending until we go into debt just paying interest on previous debt. When that happens, it's game over.

Of course, debt is a problem today due to the massive unfunded liabilities in our short term future. Our current economic difficulties are probably going to set federal tax revenues back 5-10 years (and we'll likely see lower GDP numbers for awhile). In other words, in 10-20 years, our crushing debt combined with our crushing SS and medicare liabilities are going to finally level us.
 

halik

Lifer
Oct 10, 2000
25,708
1
0
Originally posted by: bamacre
Originally posted by: halik
Originally posted by: bamacre
Originally posted by: halik
Alright, let me add to it - if you say as little as possible, why is debt bad?
Debt in the general sense does not have to be bad. I would never support a forced balanced budget, because there could be times of emergency when it would be wise to run a temporary deficit.

But this is certainly not what we have today. Why is it bad? Because of interest payments for one. Wasted money. Malinvestment.
Right, but it's interest payments vs. opportunity costs (taxing people). If the return on people keeping their tax money is greater than the interest on the debt, then it would be irrational to tax - the more debt you have, the more return you get on your $1 of taxes paid due to the additional risk from leverage.

Same way from a tax payer perspective, you can maintain a constant amount of debt and your return in the form of government services is greater than if government only uses taxes to finance themselves. It's really a questions of capital structuring much like any other company.
I don't disagree, but the positive or negative result depends on what the taxpayers do with the money they keep, and on what government is spending money.
Well yes, if you think that government is inherently a waste of money, then you wouldn't be paying any taxes.

But everything else held constant, with debt the government can provide you more for each $1 of your taxes paid (the tradeoff being some marginal increase of default risk)
 

StageLeft

No Lifer
Sep 29, 2000
70,214
2
0
Good point. I have no idea. If debt was necessarily bad, I'd not have any and I'd be in an apartment now as opposed to a house, so it's definitely not all bad. I have no idea what a proper level would be. I guess I know it when I see it. ;)
 

IronWing

No Lifer
Jul 20, 2001
61,841
14,970
136
US federal debt serves an important function in the financial world. It is a relatively safe place to park capital (there is inflation risk but not much default risk). When the Treasury cut back on issuing new debt in the late 1990's, there was some market dislocation as folks tried to find someplace else to park funds. The very low rates on federal debt in the last 10-15 years (yes, I know interest rates are set by auction, so this is somewhat circular reasoning) have led to institutions seeking higher, riskier yields elsewhere. Treasury debt enables the dollar to function as a reserve currency.
 

ayabe

Diamond Member
Aug 10, 2005
7,451
0
0
According to Greenspan a debt of zero is a bad thing:

"The most recent projections, granted their tentativeness, nonetheless make clear that the highly desirable goal of paying off the federal debt is in reach before the end of the decade. This is in marked contrast to the perspective of a year ago when the elimination of the debt did not appear likely until the next decade.

But continuing to run surpluses beyond the point at which we reach zero or near-zero federal debt brings to center stage the critical longer-term fiscal policy issue of whether the federal government should accumulate large quantities of private (more technically nonfederal) assets. At zero debt, the continuing unified budget surpluses currently projected imply a major accumulation of private assets by the federal government. This development should factor materially into the policies you and the Administration choose to pursue.

I believe, as I have noted in the past, that the federal government should eschew private asset accumulation because it would be exceptionally difficult to insulate the government's investment decisions from political pressures. Thus, over time, having the federal government hold significant amounts of private assets would risk sub-optimal performance by our capital markets, diminished economic efficiency, and lower overall standards of living than would be achieved otherwise.

Short of an extraordinarily rapid and highly undesirable short-term dissipation of unified surpluses or a transferring of assets to individual privatized accounts, it appears difficult to avoid at least some accumulation of private assets by the government.

Private asset accumulation may be forced upon us well short of reaching zero debt. Obviously, savings bonds and state and local government series bonds are not readily redeemable before maturity. But the more important issue is the potentially rising cost of retiring marketable Treasury debt. While shorter-term marketable securities could be allowed to run off as they mature, longer-term issues would have to be retired before maturity through debt buybacks. The magnitudes are large: As of January 1, for example, there was in excess of three quarters of a trillion dollars in outstanding nonmarketable securities, such as savings bonds and state and local series issues, and marketable securities (excluding those held by the Federal Reserve) that do not mature and could not be called before 2011. Some holders of long-term Treasury securities may be reluctant to give them up, especially those who highly value the risk-free status of those issues. Inducing such holders, including foreign holders, to willingly offer to sell their securities prior to maturity could require paying premiums that far exceed any realistic value of retiring the debt before maturity. "

**************************
The time has come, in my judgement, to consider a budgetary strategy that is consistent with a preemptive smoothing of the glide path to zero federal debt or, more realistically, to the level of federal debt that is an effective irreducible minimum. Certainly, we should make sure that social security surpluses are large enough to meet our long-term needs and seriously consider explicit mechanisms that will help ensure that outcome. Special care must be taken not to conclude that wraps on fiscal discipline are no longer necessary. At the same time, we must avoid a situation in which we come upon the level of irreducible debt so abruptly that the only alternative to the accumulation of private assets would be a sharp reduction in taxes and/or an increase in expenditures, because these actions might occur at a time when sizable economic stimulus would be inappropriate. In other words, budget policy should strive to limit potential disruptions by making the on-budget surplus economically inconsequential when the debt is effectively paid off.


Text

So a zero or close to zero debt would lead to an accumulation of private assets by the Feds and that isn't a good thing.
 

BoberFett

Lifer
Oct 9, 1999
37,587
9
81
Over time, the answer should be zero. I understand deficity spending in lean times to attempt to spur economic activity, but that debt should be paid down and converted into savings during the boom times. We can fluctuate back and forth, but average over a time period, say 30 years, the debt should be zero.
 

First

Lifer
Jun 3, 2002
10,530
271
136
Originally posted by: smashp
Total Obligations By the FED is 50 trillion if you include all the liabilities such as SS and medicare.
And the government will have taken in more tax revenue than that by the time they actually have to pay SS and medicare. It's not hard to pay for either one even if you don't raise taxes, since moderate spending reductions and increases in population more than pay for those entitlements (though I do hate that they were put in place).

Also, ideally, we'd be consistently in debt as long as it was manageable. A debt of zero makes no sense if you understand TVM and debt financing. Would be sanely stupid in the extreme to bring the debt down to zero.
 

heyheybooboo

Diamond Member
Jun 29, 2007
6,289
0
0
As noted, zero debt is fiscally irresponsible.

Debt for capital outlay for infrastructure is not a bad thing - especially if that debt is paid for with user fees or direct taxes (using petrol taxes or water/sewer revenues as an example).

Debt for operational purposes during times of economic expansion is just so Republican

VooDoo Economics does not work.
 

Dr. Zaus

Lifer
Oct 16, 2008
11,770
347
126
Originally posted by: halik
I keep seeing these misconceptions flying around, so i figured this would be a good way to get a consensus.

How much national debt should the U.S. have any more importantly why/how did you get your answer
the right answer:

More debt during times of economic contraction and less debt during times of economic expansion is how much debt we should have.

Debt should be added/subtracted with an eye on our monetary policy, balancing the need for job creation with the dangers of inflation all vis a vis inflation.
 

Mursilis

Diamond Member
Mar 11, 2001
7,760
11
81
Originally posted by: ayabe
So a zero or close to zero debt would lead to an accumulation of private assets by the Feds and that isn't a good thing.
How's that? If the gov't were consistently running surpluses, I imagine either spending would rise or taxes would fall to eliminate that "problem". Either way, this is an absurd debate - we're nowhere close to an elimination of the debt, and that likely won't happen anytime soon.
 

SP33Demon

Lifer
Jun 22, 2001
27,935
141
106
Originally posted by: Evan
Originally posted by: smashp
Total Obligations By the FED is 50 trillion if you include all the liabilities such as SS and medicare.
And the government will have taken in more tax revenue than that by the time they actually have to pay SS and medicare. It's not hard to pay for either one even if you don't raise taxes, since moderate spending reductions and increases in population more than pay for those entitlements (though I do hate that they were put in place).

Also, ideally, we'd be consistently in debt as long as it was manageable. A debt of zero makes no sense if you understand TVM and debt financing. Would be sanely stupid in the extreme to bring the debt down to zero.
So what is your tipping point until hyperinflation hits? 100 Trillion? And tell us why the Fed shouldn't give each of us $20,000 apiece (a 7Trill surplus to help our hard economic times)? Of course debt is good, but what is your number. And tell us YOUR estimate of the inflation rate once SS and medicare are fully realized from baby boomers in 20 years (2028).
 

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