Can't the debt just keep rising? If it gets to $50 trillion when I'm 50, will that matter? $100 trillion?
When does the time to pay the piper come, and who's decision is it?
Can't the debt just keep rising? If it gets to $50 trillion when I'm 50, will that matter? $100 trillion?
When does the time to pay the piper come, and who's decision is it?
OK, I'll bite: higher interest rates, slower economic growth, weaker job markets & higher taxes, to name a few.
Given the demographics of the USA the debt is going to increase while the Baby Boomers are retired and then shrink as they die off. Further, the absolute number is almost meaningless depending on how much the money supply grows.
While paying for the Boomers seems like an impossible task with the number of people in the immediately following generation, once you account for the numbers in the generations after that things don't look so bad.
If the problem actually becomes important, the Rs and the Ds will start to work together. It is easy to be stubborn when you know you are arguing about nothing.
No repercussions.
People freaked when Reagan tripled the debt and thought there'd be hell to pay.
Now it's 5-6 times of where Reagan left it and we aren't having issues.
Healthy inflation will take care of the burden.
Pay the piper?
The national debt will never be paid off or down in our lifetimes.
As long as GDP grows, debt can be sustained forever.
More taxes, fewer benefits.
I wouldn't worry too much about it.
National debt is not the same as household debt. The largest share of debt as a fraction of GDP was right after WWII. More than right now. You don't hear anyone complaining about WWII debts today; it didn't cripple us.
We were able to pay of the WWII debts by having a growing economy. Similar to how the relative cost of your fixed mortagage is less at year 1 of payment compared to year 30.
We've always had lots of debt in the USA. As long as politicians and American continue to grow the economy I wouldn't worry about our debt.
I would worry about making sure that GOVT is investing in education, science and infrasture because having those things in place will allow us to grow out of debt. It would also help our debt situation to stay out of foreign conflicts (ie..irag and Afghanistan).
What effect will it have on you down the line? Huger national debt. Other than that, not a lot.
Another serious question wrote:
Can't the debt just keep rising? If it gets to $50 trillion when I'm 50, will that matter? $100 trillion?
When does the time to pay the piper come, and who's decision is it?
Another one who slept through their macroeconomics class.
The U.S. debt is denominated in U.S. dollars. Borrow $20 from yourself and tell me how urgent it is to pay yourself back.
Yes, there are other consequences, but running a defecit is essentially a jobs program. It's not the debt number itself that matters. How the money circulates is actually the crux of the issue.
We as Americans are making terrible industrial policy and intellectual policy decisions as evidenced by the near zero interest rates and near zero inflation, shrinking middle class.
The political shift to the right is not working as promised by the right.
In simple terms, the higher the debt, the more interest the country needs to pay. That interest will be paid for by either raising taxes and keeping existing govt. programs or cutting govt programs and using the money to pay the debt. Revenue will also increase as the economy grows.
Taxes can be raised by increased revenues and therefore increased income taxes in an improving economy or simply by raising the tax rates or closing loopholes on the taxpayers.
In general the concern is that increased tax revenue due to an improved economy will not keep up with the increasing levels of debt and required debt service the govt is adding.. Therefore the younger generation may be stuck with covering it by paying a higher tax rate. The debate will rage on as to which segment of society should pay a higher rate, but overall, everyone will most likely pay one way or the other either by paying more taxes or receiving less assistance from the government.
But right now tax rates or much lower than when National debt was a fraction of what it was 20-30 years ago.
So higher debt doesn't have to mean higher tax rates.
Higher tax revenue can be raised by higher average income without changing tax rates.
"In general the concern is that increased tax revenue due to an improved economy will not keep up with the increasing levels of debt and required debt service the govt is adding."
Yes, that would be a concern. Or a fear.
The same fear that around 20-30 years ago that was unfounded.
X-Runner wrote:
But right now tax rates or much lower than when National debt was a fraction of what it was 20-30 years ago.
Higher tax revenue can be raised by higher average income without changing tax rates.
.
Things are slightly different than 20 to 30 years ago. Debt to GDP was 53% when Bush Sr. began in office, 56% when Bush Jr. started (83% when he left, while funding a couple of wars). It is projected to be 102.7% when Obama leaves office. Correct, tax rates are lower now--so how you going to pay for the higher debt relative to total economic output? Raise taxes or cut programs and most likely both.
Using 1990 as a base year, GDP is now about 130% while wages are only 105%--so wage growth is flat at best and certainly isn't keeping up with the growth in debt. Incomes aren't growing fast enough to increase revenue from income taxes at the same tax rates--so rates have to go up if you don't want to give up all the govt. safety nets.
xcskier66 wrote:
National debt is not the same as household debt. The largest share of debt as a fraction of GDP was right after WWII. More than right now. You don't hear anyone complaining about WWII debts today; it didn't cripple us.
We were able to pay of the WWII debts by having a growing economy.
The damage of manufacturing facilities around the world during WWII is what allowed the US to grow its economy. There was little competition--factories needed to be rebuilt--and the US had a manufacturing workforce, and facilites, that needed something to do after the war. That something was selling goods to the rest of the world.
After WWII, Japan's economy grew fast because they did not allowed to have a military, and therefore no defense budget. The US protected Japan's economic interests post-WWII.
http://www.iun.edu/~hisdcl/h207_2002/jecontakeoff.htmYes, the debt can just keep rising.
Much of the debt is bad. Let's admit that right away.
But did you ever stop to consider how much of the debt is really quite good? A big part of the debt is investors (other countries) who have given us money, goods, or services to use that we're just going to repay with a little interest. They're effectively funding us to do the things we want and then we're just paying them off later. The debt is not what matters. What matters is that we don't default on these loans. That's why it was such a big deal that we keep our A+ rating, because that means we can be counted upon to repay whatever we borrow. That rating is more meaningful than any number of dollars for our debt or deficit.
Another serious question wrote:
Can't the debt just keep rising? If it gets to $50 trillion when I'm 50, will that matter? $100 trillion?
When does the time to pay the piper come, and who's decision is it?
Detroit, on a national scale.
The answer to how are we going to continue servicing debt with these low tax rates and stagnant income is that the pieces have to come together for personal income to grow.
Higher income and higher employment will lead to higher tax revenue and at the same time less of a need for government spending.
Raising tax rates and/or cutting programs puts a strain on the economy which may require more debt to be created.
We can get over the hump and gain momentum and maybe get personal income and GDP growing at a higher pace than the debt.
Then those ratios will get better.
The answer to save everything is growth.
As long as growth is steady we will be fine.
We're still licking our wounds from the shadow of the great recession but all numbers have been trending positive for the last several years.
The fact that it is not a boom may be good because that may mean there isn't a bust coming.
The Piper wrote:
X-Runner wrote:But right now tax rates or much lower than when National debt was a fraction of what it was 20-30 years ago.
Higher tax revenue can be raised by higher average income without changing tax rates.
.
Things are slightly different than 20 to 30 years ago. Debt to GDP was 53% when Bush Sr. began in office, 56% when Bush Jr. started (83% when he left, while funding a couple of wars). It is projected to be 102.7% when Obama leaves office.
This is fundamentally false.
I borrowed $10,000 from myself from $10,000 I made. My debt to GDP is 100% I am writing myself a harshly worded letter demanding a payment schedule from myself.
Years ago, the right tried to run on the fear and uncertainty platform of "Obama will blows up public spending and your worst nightmare will be realized!!" The guy is slightly left of Reagan, has contained spending much more than Reagan ever did, and now the Right has to shift the fear and uncertainty to a fundamentally false idea. They need a different plan.
Good job everyone.
Private debt is HUGE will be much more dangerous to them than the national debt.
To the idiot who says we are borrowing money from ourselves: You don't understand economics. We are borrowing money from China, et al. in huge amounts. China and others will want something back at some point in the future. It may not be money, but it will be bad for the average American.
As many have pointed out, Wages have stagnated for more than 10 years. Yet, we are increasing debt at an astounding rate. That cannot be done forever because eventually the interest is the government's entire income so services start shutting down as that limit is approached. All you have to do it look at Eastern Block countries, Greece, Spain, etc. and you can see what crippling debt does to a country. It is where the US is headed, even if much more slowly.
Have to agree with BigEcomomy. Not sure how this is borrowing from yourself, China is the third larger holder of our debt among other foreign entities. Also, it's not so much the debt, but it is that the interest that becomes the drain mo matter who holds the debt. As far as X runner, your expectation that simply growing employment and wages to gain tax revenue is certainly noble philosophy, but the reality is that wages are stagnant and have been sluggish since well before the Great Recession. Any increases in wages during any 5 year sample over the last 20 years have been far outpaced by the increase in debt. I would love to see the problem solved your way. But it ain't happening now--and not sure you can sit around and hope it does someday.
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