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Investors purchase Treasury bonds based on the fact that the US government always pays it back. At some point won’t the amount we pay back on the deficit crowd

• dragonwriter 5y ago
  > At some point won’t the amount we pay back on the deficit crowd out other government spending? Why would it? It would if there was a fixed upper bound on spending, but if there was, therr would be a hard cap on deficits to start with. Heck, debt isn't even strictly necessary to finance government spending beyond revenue, that's just done as part of play-acting that the government isn't using its own fiat.
• nradov 5y ago
  Yes there is ultimately a maximum limit to debt service as a percentage of GDP. It can keep increasing for a long time but eventually we'll hit a crisis point when T-bond yields suddenly accelerate. At that point we'll be forced into an austerity program, and there will probably be some type of technical default. If we were spending the borrowed money on investments that actually boosted GDP then it wouldn't be a problem. But increasingly that money is being used for current government operations. We're not gaining anything for the future.