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The reason debt matters is because if it gets high enough, it may cost us more to borrow money and could eventually trigger a debt spiral where we're unable to

The reason debt matters is because if it gets high enough, it may cost us more to borrow money and could eventually trigger a debt spiral where we're unable to service our existing debt. Currently, our debt to GDP ratio is among the highest in the world [1][2]. At the moment, we're still able to borrow cheaply mainly to the dollar being the reserve currency of the world, and due to the petro dollar program (where oil producing companies sell their oil in dollars), but these things may not last (which is part of the reason why the US is pushing for war with China). The takeaway from all of this isn't necessarily that we need to cut spending on social programs while maintaining a larger military than the next several nations combined, which is what the deficit hawks referenced in this article want, it's that we should rollback the tax cuts that led the deficits in the first place. We should also be increasing domestic investments that would make us more attractive to outside investors rather than becoming an over-militarized hollowed out shell of a former super-power. If you treat your domestic economy and workforce like a leveraged buyout target, siphoning every ounce of profit out of it while saddling it with debt, the end result is likely the same as with many leveraged buyouts: collapse. 1: https://data.oecd.org/gga/general-government-debt.htm https://data.oecd.org/gga/general-government-debt.htm 2: https://data.oecd.org/chart/7bDT https://data.oecd.org/chart/7bDT

oneTbrain23 3y ago
You do know that Fed will give the interest collected to Uncle Sam directly. The main downside is debt is a built-in timebomb to destroy economy when condition is "ripe". Now seems to be so for USA, weak military (defeated by Talebans, Russian shovels destroyed EVERY single American high-tech including rumored downing 2 F35s in Syria), dedollarisation due speed-up by alternatives Brics and cryptos, high-unemployment and recession, lack innovations and unable to manufacture goods (China at least able to build 7nm,nowhere in USA land able to build such), superb incompetent leaderships in centuries for USA. I am netflix and chill on this Dalio-predicted world event.
afpx 3y ago
If I’m calculating correctly, debt is like 100,000 per person, roughly. Does someone have a plan for how to pay it? To this layperson, it seems like an inevitable default. The rich may be able to, but tax the rich, and they’ll just move it.
- bb88 3y ago
  We in the US enjoy a feature of capitalism known as income inequality. If you take that into perspective, and understand the total personal income in 2022 was $21.8T, then $33T of debt is not such a big number. It's only 50% more than the total income. [1] If everyone paid 100% income tax it would be paid off in 1.5 years. So typically you could increase taxes by 15% and pay it off in 10 years -- assuming, of course, you can keep congress from earmarking their way to political ecstacy. Another approach is to reduce congressional spending. We subsidize the oil and farming industries heavily -- for reasons. But if you believe that the market is the most efficient use of resources, then ask yourself, why should congress choose the winners? Removing oil and farm subsidies would be ~$50B/year right there. Also it's worth noting that people typically can buy houses worth 2.5x of their annual income. [1] https://www.statista.com/statistics/216756/us-personal-income/ https://www.statista.com/statistics/216756/us-personal-incom...
mempko 3y ago
How would the US not be able to pay it's debts, which are denominated in dollars. Where exactly do you think dollars come from? You can't print them. I can't print them. China can't print them. So it makes no sense. Remember, government debt is an asset to the private sector. Money IS debt. The money in your bank account either came from government spending or someone else taking out a loan.
throw0101b 3y ago
> At the moment, we're still able to borrow cheaply mainly to the dollar being the reserve currency of the world, and due to the petro dollar program […] Japan can borrow cheaply and does not have those 'advantages'. So can Germany, France, Canada, etc—often at rates lower than the US: * https://www.investing.com/rates-bonds/world-government-bonds https://www.investing.com/rates-bonds/world-government-bonds
- slantedview 3y ago
  Indeed - that they accomplish this without the benefit of being the world's reserve currency means that in some ways they're in a more stable position than we are.
IG_Semmelweiss 3y ago
The govt doesnt invest. The definition of investment is that a bad investment goes sour and you lose your money, and evetually you go out of business. The govt spends other peoples money. It can do bad things. But it never goes out of businessess. When it spends it poorly as it is often the case, they take more money from people. If they can't, they take it from unborn people. Eventually this builds up a debt. And then it implodes like you describe

oneTbrain23 3y ago

You do know that Fed will give the interest collected to Uncle Sam directly. The main downside is debt is a built-in timebomb to destroy economy when condition is "ripe". Now seems to be so for USA, weak military (defeated by Talebans, Russian shovels destroyed EVERY single American high-tech including rumored downing 2 F35s in Syria), dedollarisation due speed-up by alternatives Brics and cryptos, high-unemployment and recession, lack innovations and unable to manufacture goods (China at least able to build 7nm,nowhere in USA land able to build such), superb incompetent leaderships in centuries for USA. I am netflix and chill on this Dalio-predicted world event.

afpx 3y ago

If I’m calculating correctly, debt is like 100,000 per person, roughly. Does someone have a plan for how to pay it? To this layperson, it seems like an inevitable default. The rich may be able to, but tax the rich, and they’ll just move it.

bb88 3y ago
We in the US enjoy a feature of capitalism known as income inequality. If you take that into perspective, and understand the total personal income in 2022 was $21.8T, then $33T of debt is not such a big number. It's only 50% more than the total income. [1] If everyone paid 100% income tax it would be paid off in 1.5 years. So typically you could increase taxes by 15% and pay it off in 10 years -- assuming, of course, you can keep congress from earmarking their way to political ecstacy. Another approach is to reduce congressional spending. We subsidize the oil and farming industries heavily -- for reasons. But if you believe that the market is the most efficient use of resources, then ask yourself, why should congress choose the winners? Removing oil and farm subsidies would be ~$50B/year right there. Also it's worth noting that people typically can buy houses worth 2.5x of their annual income. [1] https://www.statista.com/statistics/216756/us-personal-income/ https://www.statista.com/statistics/216756/us-personal-incom...

mempko 3y ago

How would the US not be able to pay it's debts, which are denominated in dollars. Where exactly do you think dollars come from? You can't print them. I can't print them. China can't print them. So it makes no sense. Remember, government debt is an asset to the private sector. Money IS debt. The money in your bank account either came from government spending or someone else taking out a loan.

throw0101b 3y ago

> At the moment, we're still able to borrow cheaply mainly to the dollar being the reserve currency of the world, and due to the petro dollar program […] Japan can borrow cheaply and does not have those 'advantages'. So can Germany, France, Canada, etc—often at rates lower than the US: * https://www.investing.com/rates-bonds/world-government-bonds https://www.investing.com/rates-bonds/world-government-bonds

slantedview 3y ago
Indeed - that they accomplish this without the benefit of being the world's reserve currency means that in some ways they're in a more stable position than we are.

IG_Semmelweiss 3y ago

The govt doesnt invest. The definition of investment is that a bad investment goes sour and you lose your money, and evetually you go out of business. The govt spends other peoples money. It can do bad things. But it never goes out of businessess. When it spends it poorly as it is often the case, they take more money from people. If they can't, they take it from unborn people. Eventually this builds up a debt. And then it implodes like you describe