Question about national debt

[Ultima]

Canada and the US have pretty large national debts (US has $22000 debt per capita), but what does this mean in the large scope of things? If the debt is never repaid then what will eventually happen to the economy? If the debt IS paid then what is the benefit? Say the necessary money was raised by taxes and the debt was paid in its entirety. What would the benefit be?

 

[FoBoT]

splitting is out per capita is meaningless
you aren't taking into account all of the earning power of corporations

a better measure is to compare the debt to annual GDP

6 trillion to 11 trillion , just over 50% , not a high debt/income ratio for a corporation or an individual

also, keep in mind that the majority of the holders of the US debt are US retirees, ie we are supplementing thier SS income with "debt" income

it really isn't a problem at this level

to answer the other part

if we paid off the debt, the bond markets would be less stable, no "sure" deals from the govt issueing bonds/notes/bills to stabalize the market, so paying it all off could have detrimental effects

 

[Ultima]

bump

 

[kaiotes]

my view.
if we decrease the total debt, our annual interest payment would be lower, in effect ahve more doh to go around for other programs.
if gov't default on the debt, chaos. banking system gets F'd. nobody would lend money for gov't operation, gov't could print more money, this means inflation, take a look at the past of argentina and brazil...
pay down the debt!!

 

[vi edit]

National debt is a funny thing. 90% of Americans can't manage their own debts so they really don't have much room to comment on their governments debt which is a much more complex beast. Some parts of it are good, some parts of it are bad. Some parts of the national debt are required for private investment to remain solid, some parts of it are a detriment to private investment.

I *personally* think that it's in the best interest of all of us to start chipping away at it, but not necessarily obscessing about it and delegating all surplusses to reducing it.

It's a delicate balancing act that many of us don't really know the impacts of what would happen if you tipped the scales one way or another.

 

[chowderhead]

GDP is not the government income. Why don't we look at the "total income" the government takes in, in taxes, fees, and levies, to calculate a debt to income ratio?

The national debt is debt each taxpayer will have to shoulder. Our children will have to pay much of this debt eventually as you cannot simply ignore the amount. The national debt is currently at 6.4 trillion dollars. It is taking close to 360 billion dollars per year to pay interest. That is the fourth largest piece of the budget behind Social Security payments, Medicare and the Defense Department. In a 2.2 trillion dollar budget, the first 360 billion dollars goes to service the debt because the US will not default on the bonds. That number is staggering and continues to grow with Bush and the War and his tax cuts and the fact that he has NOT asked the American people to make any sacrifices.
More debt means more issuance of bonds ... this affects long-term interest rates and eventually inflation and the economy as a whole.

I am not saying we should pay off the debt but we must start the process to pay the debt down. 6.4 trillion dollar debts, wars and higher defense and homeland security spending in the future, Baby boomers retiring and going on Medicare and SS. If you think taxes are high now, just wait until this perfect storm hits.

 

[FoBoT]

link

A homely economic principle holds that the marginal productivity of investment diminishes as the volume of investment expands. With a high level of private investment, a bit more is not as valuable as a bit less. Increases in investment that has ebbed--like the public kind--could be more valuable than some debt reduction. Even from the narrow standpoint of measurable productivity, it is eminently possible for an incremental expansion of public investment to be more consequential than a comparable expansion of capital stock under private ownership.