What would it mean for the U.S. if it was to pay off all of its national debt?

[Jhhnn]

Why would someone want to do that when they can sit at home and watch TV and collect a government check every other week?

Standard rightwing fantasy, what they wish they were doing...

come to think of it, working as one of W's financial regulators was kinda like that, except they had to go to the office...

 

[SparkyJJO]

If this country was debt-free, that would be a miracle. But it would also be really awesome.

However, this nation runs on debt anymore. Thanks to generations of "must have now" people without regard to whether they can really afford it or not. Some debt is necessary (some car loans, houses) but so much of it is just because of greed.

I have debt for my college degree, I hate it but there wasn't much else I could do. Paying it back as fast as I can though, I want to get out from underneath that ASAP - especially if this nation and its dollar goes belly up thanks to the crooks in Washington.

 

[SunSamurai]

Well if 2010 would have been $$500,000,000,000 in interest, maybe they could cut a check for everyone instead for 1500$.

 

[Patranus]

Please point me to where/what I have tyo do to sign up for that.

I'm waiting.

http://www.edd.ca.gov/

 

[halik]

I see that no one has taken finance here ... Debt increases return on investment. That is w/o debt we'd have to fund all gov't expenditures with tax income. Since that is a lot lower, our ROI would be a lot lower.

Government sponsors many things that are usually under produced in cap. market (tragedy of commons) - research, infrastructure etc. If you cut funding, a lot of stuff won't get made - Internet, Google etc.

Also take a look at the debt load of the richest nations - U.S. is right in the middle in terms of debt/gdp.

 

[halik]

If this country was debt-free, that would be a miracle. But it would also be really awesome.

However, this nation runs on debt anymore. Thanks to generations of "must have now" people without regard to whether they can really afford it or not. Some debt is necessary (some car loans, houses) but so much of it is just because of greed.

I have debt for my college degree, I hate it but there wasn't much else I could do. Paying it back as fast as I can though, I want to get out from underneath that ASAP - especially if this nation and its dollar goes belly up thanks to the crooks in Washington.

Would you be better off w/o debt? Would you have gone to college if you had to pay it with cash?

There's no such thing as good debt vs bad debt *- all that matters is that return on that money is more than the interest rate on the debt. I can guarantee you the return on your college degree is more than the 6% you're paying for it - otherwise you wouldn't have gotten the degree.

* It's http://www.investopedia.com/university/behavioral_finance/behavioral5.asp

 

[Hacp]

I see that no one has taken finance here ... Debt increases return on investment. That is w/o debt we'd have to fund all gov't expenditures with tax income. Since that is a lot lower, our ROI would be a lot lower.

Government sponsors many things that are usually under produced in cap. market (tragedy of commons) - research, infrastructure etc. If you cut funding, a lot of stuff won't get made - Internet, Google etc.

Also take a look at the debt load of the richest nations - U.S. is right in the middle in terms of debt/gdp.

How about cutting social security and medicare? These things aren't investments. Why should we borrow money to fund these programs when there is no return on our investments? People over 65 are already past their prime and contribute very little to the ecoomy; hypothetically speaking, if they all die at once, our economy will not be negatively impacted to a large degree.

 

[halik]

How about cutting social security and medicare? These things aren't investments. Why should we borrow money to fund these programs when there is no return on our investments? People over 65 are already past their prime and contribute very little to the ecoomy; hypothetically speaking, if they all die at once, our economy will not be negatively impacted to a large degree.

I don't wanna get mugged or burgled by mobs of poor geriatrics?

Both of those things are supposed to be self-funded btw, no impact on gov't debt.

 

[Hacp]

I don't wanna get mugged or burgled by mobs of poor geriatrics?

Both of those things are supposed to be self-funded btw, no impact on gov't debt.

They're a form of tax, which causes dead weight loss, which reduces the economic growth of the country, which reduces tax receipts.

 

[heyheybooboo]

How about cutting social security and medicare? These things aren't investments. Why should we borrow money to fund these programs when there is no return on our investments? People over 65 are already past their prime and contribute very little to the ecoomy; hypothetically speaking, if they all die at once, our economy will not be negatively impacted to a large degree.

Missed it by 180 degrees.

The surplus in SS has been funding general gov't operations for over 25 years; so much so that the funds are owed nearly $5 trillion.

And "People over 65 are already past their prime and contribute very little" ???

-

 

[werepossum]

werepossum, you also have to wonder what will happen as the economy picks back up and inflation starts to set in. If we raise interest rates to compensate, especially in runaway inflation, then the debt servicing will balloon as well.

True, and a good point. Clinton switched the national debt primarily to short-term bonds, which looks like a bad idea on paper but actually saved us billions in interest. It does make us more vulnerable to ballooning interest payments, as you say. However I'm not convinced that this level of borrowing can go on much longer in any case, as the USA's fundamentals are getting progressively weaker as time goes by. While our debt as a percentage of GDP isn't the worst in the world, its sheer magnitude would threaten, and probably take down, the world's economy if we default. That's got to be giving some people heartburn as they decided whether to roll over their T-bills or get out.

 

[Hacp]

Missed it by 180 degrees.

The surplus in SS has been funding general gov't operations for over 25 years; so much so that the funds are owed nearly $5 trillion.

And "People over 65 are already past their prime and contribute very little" ???

-

I guess the "surplus" in SS has been funding the huge medicare hole? We need to get rid of these social programs, cut our taxes, and make the united states more attractive for businesses. Look at Dubai, it is a very good example of a service economy financed by excess debt gone bad. We should lower taxes which willlower employment costs and bring us more of those
important manufacturing jobs.

 

[HendrixFan]

Would you be better off w/o debt? Would you have gone to college if you had to pay it with cash?

There's no such thing as good debt vs bad debt *- all that matters is that return on that money is more than the interest rate on the debt. I can guarantee you the return on your college degree is more than the 6% you're paying for it - otherwise you wouldn't have gotten the degree.

* It's http://www.investopedia.com/university/behavioral_finance/behavioral5.asp

As talked about in this thread, the interest on the national debt is (based on varying numbers) between 20-40% of the money brought in through income tax. This does not include Medicare or SS taxes, which collectively run a surplus but will eventually run negative (not including the money that has been borrowed out).

Aside from asking simply what the return is on the money, you also have to determine if that return is stable or if you are overleveraged. Most of the concern in this thread is "what ifs" and the debt load becomes unsustainable. Very similar to 0% balance transfers on credit cards and always assuming someone will be there to make a new offer.

Why are we borrowing so much money? There was an interesting article linked somewhere in this forum about how the Transportation Dept had one person making $170k a year a few years ago (fairly recently) and now has over a thousand making that amount. Government spending is up near 45% of GDP. How much of a free market economy do we have then? How can we accurately tell what "return" we are getting on spending taxes and borrowed money on 45% of GDP. Since we are in a deflationary period, it would seem the returns are negative.

 

[Darwin333]

Please point me to where/what I have tyo do to sign up for that.

I'm waiting.

If you are a resident of Louisiana I know of a woman who will help you through the system and maximize your "benefits" for a fee. One of our field hands sister used her "services" and was able to increase her monthly income by $400. If you PM me your contact details I am sure I can get it forwarded to her.

 

[werepossum]

As talked about in this thread, the interest on the national debt is (based on varying numbers) between 20-40% of the money brought in through income tax. This does not include Medicare or SS taxes, which collectively run a surplus but will eventually run negative (not including the money that has been borrowed out).

Aside from asking simply what the return is on the money, you also have to determine if that return is stable or if you are overleveraged. Most of the concern in this thread is "what ifs" and the debt load becomes unsustainable. Very similar to 0% balance transfers on credit cards and always assuming someone will be there to make a new offer.

Why are we borrowing so much money? There was an interesting article linked somewhere in this forum about how the Transportation Dept had one person making $170k a year a few years ago (fairly recently) and now has over a thousand making that amount. Government spending is up near 45% of GDP. How much of a free market economy do we have then? How can we accurately tell what "return" we are getting on spending taxes and borrowed money on 45% of GDP. Since we are in a deflationary period, it would seem the returns are negative.

Very good point. I saw an article recently that said the average federal government worker now makes over $71K not counting overtime. The national average is less than $41K counting overtime. The conventional wisdom has long been that government employees make less than their non-government counterparts, but have better security and benefits. If that was ever true, it's long gone. With numbers like this the term "civil servant" needs to give way to "civil overlord".

 

[SparkyJJO]

Would you be better off w/o debt? Would you have gone to college if you had to pay it with cash?

There's no such thing as good debt vs bad debt *- all that matters is that return on that money is more than the interest rate on the debt. I can guarantee you the return on your college degree is more than the 6% you're paying for it - otherwise you wouldn't have gotten the degree.

* It's http://www.investopedia.com/university/behavioral_finance/behavioral5.asp

That debt that I have is a manageable size, payable, and yes, an investment in my future. However, I have no intent of carrying it forever. In fact, it is going to be gone ASAP. Granted, it'll be replaced eventually with a house loan, but that also will be of manageable size with the intent of being paid off.

The debt that this nation has is not manageable, not really able to be paid off in a reasonable amount of time (not at the rate we're going) and I see no politician out there who has any intent of paying it off anyway, just adding more and more to it, and chunks of it are not an investment in any future but rather a horrible waste of money. There is something known as TOO MUCH debt, and this nation has way too much.

 

[SSSnail]

It means we're all in a dream if that to ever happen. Don't you know debt was created of the people, by some other people for us lowly people?

 

[rchiu]

I see that no one has taken finance here ... Debt increases return on investment. That is w/o debt we'd have to fund all gov't expenditures with tax income. Since that is a lot lower, our ROI would be a lot lower.

Government sponsors many things that are usually under produced in cap. market (tragedy of commons) - research, infrastructure etc. If you cut funding, a lot of stuff won't get made - Internet, Google etc.

Also take a look at the debt load of the richest nations - U.S. is right in the middle in terms of debt/gdp.

heh, maybe you need to revisit the finance course you've taken. Debt does not increase ROI, at least not all the time. You only increase ROI when the investment your made with debt has an ROI > cost of borrowing.

I am fine with US debt as long as
1) government justifies the spending with quantifiable return that's > cost of borrowing.
2) interest payment is not too high and in the worst case scenario, like a prolong depression, the goverment can still meet the interest payment to avoid national default. Remember interest payment of your current debt is fixed liability and your revenue depends on your economy.

Simple things, just like any coporate finance 101 course you would take on simple company debt structure.

I don't see the US government meeting criteria #1 and states like Cal is already failing criteria #2.