vand wrote:It is a concern because given that the US government spends $4 for every $3 they collect via taxation, they have no chance of running a balanced budget. Either you believe that the debt can continue to grow indefinitely - to 300%, 500%...? OR, you believe that it will, at some point stop growing.
No country has had a "balanced budget" since 1680 becasue that would destroy the economy. I found a quote on this from the economist William Vickrey that explains what I mean:
"Deficits add to the net disposable income of individuals, to the extent that government disbursements that constitute income to recipients exceed that abstracted from disposable income in taxes, fees, and other charges. This added purchasing power, when spent, provides markets for private production, inducing producers to invest in additional plant capacity, which will form part of the real heritage left to the future. This is in addition to whatever public investment takes place in infrastructure, education, research, and the like. Larger deficits, sufficient to recycle savings out of a growing gross domestic product (GDP) in excess of what can be recycled by profit-seeking private investment, are not an economic sin but an economic necessity. Deficits in excess of a gap growing as a result of the maximum feasible growth in real output might indeed cause problems, but we are nowhere near that level. Even the analogy itself is faulty. If General Motors, AT&T, and individual households had been required to balance their budgets in the manner being applied to the Federal government, there would be no corporate bonds, no mortgages, no bank loans, and many fewer automobiles, telephones, and houses."
vand wrote:Ultimately debt is promise of future payment - if too many promises are being made that can't possibly be kept, and people really believe they can't be kept, then the backing of the issuing authority and the buying power of its promises is worth zero
Again, trivially true perhaps. Yet the keeping of the promise is entirely under govermment control. In terms of the servicing of
interest on the debt, numbers are just numbers - there is nothing magically bad about big ones. Of course, if the US government
doesn't raise the debt ceiling it would lead to a huge decline in the value of the US dollar, sky-high interest rates, and a massive recession. But that's not going to happen because the ceiling is a strategic pawn on a political chessboard about completely
unrelated things like abortion, Ukraine and lordy knows what else the Republicans want to be angry about. If they want to burn down the world, well perhaps, but they know they would lose everything if they did.