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Can anyone explain to me why it is awful for a person to live in debt but it is okay for the federal government to do so? I've never understood this in the lea

Can anyone explain to me why it is awful for a person to live in debt but it is okay for the federal government to do so? I've never understood this in the least, other than the "kick the can down the road, America superpower backed by military blah, blah, blah" very weak argument. History is full of the carnage of failed empires that had this same idea. https://fred.stlouisfed.org/series/GFDEBTN https://fred.stlouisfed.org/series/GFDEBTN 32 trillion in debt seems insurmountable, has anything like this ever reversed course historically?

kaesar14 3y ago
I don't think it's 'awful' for a person to live in debt. The richest Americans have loads of debt. A significant part of the American Dream is to own a house which is essentially debt. Perhaps the argument is more about whether the US government is drowning in debt more akin to CC debt (bad debt) or mortgage debt (good debt) but in the abstract, leverage is a perfectly fine thing for a government to use in order to fund its development.
- logicchains 3y ago
  The American dream is to "own" a house, not to own a mortgage.
  - anon291 3y ago
    You do not own a mortgage. You have sold a mortgage.
- nxm 3y ago
  Debt is also how economies and a lot of companies grow
  - HideousKojima 3y ago
    They could also grow by saving and reinvesting surpluses/profits
    - intotheabyss 3y ago
      The entire point of debt is to bring future revenue to the present so that you don't have to wait for savings to trickle in every year.
      - HideousKojima 3y ago
        At the cost of some portion of your future revenue
        airstrike 3y ago
        and if that future revenue is N times greater than you would otherwise get without debt, then it's still better to take on debt. Would you rather have 90% of $1M or 100% of $800k?
        HideousKojima 3y ago
        >if That single word is doing all of the heavy lifting for you. "If" the housing market will never crash, then it's a surefire safe investment! Better buy tons of houses to flip on credit. There's no guarantee that your debt/investment will succeed, which is why banks try (and often enough, fail) to price in risk with things like varying interest rates, collateral, etc.
        airstrike 3y ago
        the 90% accounts for the "if". my point is there an expected value for the future revenue amount, subject to your own assumptions about the probability of each outcome and your discount rate for the value of that money over time in scenarios where your expected value discounted to present value is greater than the alternative, you make the investment. it's really finance 101... it's just NPV
    - grotorea 3y ago
      AFAIK the standard economic opinion is that this is suboptimal and leads to underinvestment.
digitalengineer 3y ago
Small correction: it’s awful for a poor person to live in debt. If you are quite wealthy there are lots of ways to borrow money and it’s all good!
- logicchains 3y ago
  >If you are quite wealthy there are lots of ways to borrow money and it’s all good! If you have a negative net worth (more debt than assets) you're generally not considered a wealthy person.
  - fbdab103 3y ago
    Perception is everything. For quite a while, Sam Bankman-Fried was billions in the hole, but could still secure more funds on demand.
  - thaumasiotes 3y ago
    > If you have a negative net worth (more debt than assets) you're generally not considered a wealthy person. That's only true if your debt and assets are both small. If you have $200 million in assets and $500 million in debt, you will be considered a wealthy person. You would only stop being wealthy if your stuff got taken away.
  - mikeyouse 3y ago
    There’s no meaningful sense in which the Federal Government could be considered to have a negative net worth.. they have a ‘stake’ in the collective value of the largest and most vibrant economy on earth. People’s conception of the Federal ‘balance sheet’ as limited to the dollars in bank accounts explains why they are continually surprised that $30+ trillion in debt is shrugged off by the market and every knowledgeable economist.
  - grotorea 3y ago
    How would you even calculate the asset value for a government? Normally you'd compare it to GDP which is something else.
  - 3y ago
teaearlgraycold 3y ago
So I don’t know if what the government is doing is the best long term decision. But the US’s national debt could be compared to a mortgage. And the government’s income is massive so they can be in trillions of debt without it exceeding what they can reasonably pay off (never paying it all off, but paying off individual loans). So by your analogy, is it actually bad for a normal person to be in debt? Normal people have mortgages.
- askonomm 3y ago
  Has the number ever decreased? As in, have they actually paid things off? Without actual numbers, U.S feels increasingly like a high-school bully who borrows money and then threatens with violence when that money is wanted back.
  - l33t7332273 3y ago
    I don’t think US really threatens violence when people collect on the public debt. This is quite rare historically because it makes people weary to lend you money. Payments, including interest, are regularly made and of course individual debts are paid all the time.
  - buerkle 3y ago
    The only time the US was debt free was a few years during Andrew Jackson's presidency.
  - macintux 3y ago
    We were paying it off at the end of the 90s, some projections had the debt paid off in 10 years, but then Bush 2.0's tax cuts and 9/11 wrecked everything. (I could be off in some details, but I remember my despair when Greenspan gave Congress cover for supporting the tax cuts by testifying that it wasn't necessarily a good thing to be debt-free.)
  - metabagel 3y ago
    A better question is whether the percentage of debt to GDP has ever decreased, and it has. https://fred.stlouisfed.org/series/GFDEGDQ188S https://fred.stlouisfed.org/series/GFDEGDQ188S
uticus 3y ago
asking about state-level debt gets into philosophical (and I would argue even religious) territory very quickly, but to answer your questions: 'why...it is okay for the federal government...' federal govt in US is following general patterns at business and individual scale, because democratic processes lead to a reflection of decisions at smaller elements of society at bigger ones. '...ever reversed course historically?' no reversals, but plenty of upheavals, such as war, conquering, etc.
HideousKojima 3y ago
Most explanations I've seen boil down to to "The US (or any other sovereign nation with control over their own currency) can print their way out of debt, it's literally impossible for the US to default." This ignores the devastating economic effects that printing such a huge amount of currency would cause (likely comparable to the effects of simply defaulting) and ignores the fact that sovereign nations with control over their own currency have chosen to default anyway (see Russia ~20 years ago for an example).
- dragonwriter 3y ago
  > Most explanations I've seen boil down to to "The US (or any other sovereign nation with control over their own currency) can print their way out of debt, it's literally impossible for the US to default." Its impossible for the US to be forced to default. Its quite possible for the US to make a political choice to default, and it has come very close to doing so.
  - evancox100 3y ago
    Also, not only is it possible, but many countries have in fact chosen to default on debt denominated in their own currency, rather than subject their citizens to wild inflation and/or break norms around reserve bank independence. So, it could happen even if US is not forced to, I agree. For a starting point, see https://www.bankofcanada.ca/wp-content/uploads/2020/06/BoC-BoE-Sovereign-Default-Database-Local-Currency-Default-Frequency.pdf https://www.bankofcanada.ca/wp-content/uploads/2020/06/BoC-B...
    - dllthomas 3y ago
      Though for the US, it would be clearly unconstitutional.
- scatters 3y ago
  The Russian rouble was not free floating prior to the crisis. They tried to defy the iron triangle and paid for it. This is not a problem for the USA, since other currencies are denominated in terms of the dollar. The reason it would be impossible for the US to default is that the US is not significantly in debt. Most of the federal debt is held domestically, meaning by the US. You can't be in debt to yourself.
DrNosferatu 3y ago
That’s the Fallacy of Composition - the economics of a government are not the economics of a grocery store or a household: https://amp.theguardian.com/business/2013/nov/21/post-crash-economics-austerity-common-fallacies https://amp.theguardian.com/business/2013/nov/21/post-crash-...
- ahallock 3y ago
  But imagine if they were. Wars and other destructive behaviors would be a lot more difficult
- uticus 3y ago
  Sorry, but 'Fallacy of Composition' is just a theory. (Disclaimer: I happen to disagree with it.) Ultimately the way these ideas about economic theory are approached is a lot more philosophical/religious-based (for the Atheists, please read that 'strong belief-based') and a lot less math based than some would be willing to admit. Honestly the math itself is usually statistical, which in turn is a lot more difficult to comprehend and analyze properly.
  - HFguy 3y ago
    I would put aside statistics and whether we completely understand how the economy works (we don't). Just ask...are there are very fundamental differences between the finances of an individual and the government? There are. For starters, the government can simply print money and pay off debts. They can also choose, by their actions, to inflate away nominal liabilities. So then it is reasonable to consider that "being in debt" may have different ramifications for the government than for an individual.
    - uticus 3y ago
      > may have different ramifications for the government than for an individual I can only agree ramifications look different when an inappropriately narrow timespan is in focus. Thinking through history, what nations have been able to ultimately avoid ramifications from significant debt – the same sort of scenario that would in proportion cause ‘ramifications’ for individuals or businesses? I can think of several historical instances where a nation having significant debt appeared to have no ‘ramifications’ early on but were unable to avoid the inevitable (and inenviable) outcomes. I mean, even an individual may get deeply – horribly - in debt yet avoid ramifications for a time. But the bills will come due. No doubt a government is not the same thing as a business or an individual. But to dismiss government debt as playing by different rules than debt elsewhere is foolish.
deleted 3y ago
[deleted]
ahallock 3y ago
You can leverage debt as an individual as well. We often shame people for bankruptcies when we shouldn't. Businesses fail all the time and go bankrupt -- running a household is similar and can fail.
- HideousKojima 3y ago
  Barring difficult to foresee circumstances like an expensive medical procedure, a debilitating injury/illness, or a devastating lawsuit, most of the circumstances that lead to a household going bankrupt are directly attributable to mismanagement.
dragonwriter 3y ago
> Can anyone explain to me why it is awful for a person to live in debt but it is okay for the federal government to do so? Not sure its awful for a person, depending on the kind of debt, but people and the government are differently situated. For one, people (natural or corporate) who have a debt in something that isn't a token that they can issue at will have an externally enforced obligation to do whatever is necess5 to acquire those tokens and sacrifice whatever is necessary to deliver them to the creditor. Currency-issuing governments with debt in their own currency have an obligation to... ultimately, if nothing else works or is desirable, just poof up some currency. Also, for certain governments, there isn't a vastly more powerful external enforcer of whatever obligation they have, whereas with most people, there is, in the form of the local government.
DougWebb 3y ago
I'm hardly an expert, but I think "government debt" and "government investment" are accounted for the same way, but only the former is a problem. If the government sells bonds/T-bills (eg acquires debt) and uses that to improve the country in a way that benefits the citizens and encourages population and economic growth, then its worth doing. If the government uses the money only to pay interest on existing debt, or to give it away to make wealthy citizens more wealthy, or other unproductive uses, then it's not so good. The attacks directly on the national debt are a political strawman, meant to distract from the real issues about where revenue comes from and how it is spent. It's like the constant debt ceiling wailing; Congress sets a budget and legislation that requires spending more than the revenue available, then sets a debt ceiling that prevents the treasure from borrowing to cover the required by law spending, then bitches and moans and grandstands over how the debt ceiling creates a crisis. It's all for show.
- TimedToasts 3y ago
  > The attacks directly on the national debt are a political strawman, meant to distract from the real issues about where revenue comes from and how it is spent. No, I assure you that those of us concerned about the national debt are actually concerned about it.
nradov 3y ago
It's not awful for a person to live in debt. Debt is a useful financial tool. Unlike a person, a government has an unlimited lifespan and debt can persist forever. This only becomes a concern when total debt exceeds some multiple of GDP. The exact limit will vary based on many factors including interest rates, economic growth rate, demographics, and tax compliance. Once that limit is breached it tends to cause a fiscal and political crisis within a few years. Either default or hyperinflation in the short term, followed by a long period of austerity.
- dragonwriter 3y ago
  > This only becomes a concern when total debt exceeds some multiple of GDP. The exact limit will vary based on many factors including interest rates, economic growth rate, demographics, and tax compliance. Once that limit is breached it tends to cause a fiscal and political crisis within a few years. This is the kind of theory that, without a concrete model of how the limit varies (or even with one, if it involves much statsitical variability) is nonfalsifiable, either because the probability of a crisis in actual concrete conditions is unknown or the range of variability is too wide to make strong conclusions given the small-n problem with real-world conditions, but at the same time becomes very easy to rationalize almost any real-world conditions as fitting.
intalentive 3y ago
Depends on the productivity of the country and whether the debt can be exported (as reserve currency) or monetized (as inflation). The USA checks all these boxes for now. Highly productive and the costs can be passed on to others. Otherwise you are correct. Zimbabwe certainly has to live within its means.
jmyeet 3y ago
People like to use the household analogy when it comes to government spending and debt. Some cynically do it to justify cutting social programs. Some (and I include you here) are genuinely confused. First, literally nobody in government cares about the debt. Of the $32T debt in our entire history, $8T comes from the 4 years of the Trump presidency. Remember that when the next fiscal hawk starts chirping about the need to cut spending. Second, debt doesn’t matter when you can print money in the currency the debt is denominated in. We borrow US dollars. We print US dollars. So if we’rea household who has to pay out build you can’t ignore it fact that we have a money printer in the next room. There have been sovereign currency devaluations in the past too, famously by FDR who changed the gold standard. I would suggest looking up videos on Modern Monetary Theory.
TacticalCoder 3y ago
> 32 trillion in debt seems insurmountable, has anything like this ever reversed course historically? Never and it is insane that there are apologists for such a sad state of affairs. https://www.usdebtclock.org/ https://www.usdebtclock.org/ This is not going to end well. That's what happen when totally clueless, incompetent and senile people are pulling the levers, following the advices of visionaries like Paul "it will become clear that the Internet's impact on the economy has been no greater than the fax machine's" Krugman. > https://fred.stlouisfed.org/series/GFDEBTN https://fred.stlouisfed.org/series/GFDEBTN What is insane on that graph is that it doubled in ten years and quadrupled in 15 years. Anyone who thinks this is reasonable is simply out of his mind.
- uticus 3y ago
  The numbers are just outside comprehension. We can comprehend a dollar, or a hundred dollars, in the hand. We may be able to imagine (or have seen) a room full of a couple tens of thousands of dollars. But to extrapolate one, to 32 trillion of the same... If a 4 GHz processor core executes an instruction every clock cycle, it would still take two hours to iterate that instruction 32 trillion times. If you lined up 32 trillion inches, it would be over 505 million miles. If a dollar bill is 0.1 millimeters thick, and you stacked 32 trillion of the bills on top of each other, the stack would be almost 2 million miles high. Etc By the way, we went past $33 trillion in September, and reached $33.5 20 days later. Only a half trillion added in 20 days.
_jal 3y ago
To start with, individuals do not print their own currencies. People always jump in immediately to say you can't inflate your way out of debt/look at Argentina/etc., but that's missing the point, I'm not saying that. The point is a sovereign currency issuer has a fundamentally different relationship to money than mere people. They can certainly still get themselves in trouble through mismanagement, no doubt, but there are a lot of levers they have that are unavailable to normal folks. Like some other major differences: not too many people have massive standing armies or hundreds of millions of tax payers, or control over a substantial fraction of global financial flows. Again, not saying eleventy-trillion in debt is not a problem, or that all's well, or anything else like that. I am saying that comparing private finance to sovereign finance is a category error, and things will make much more sense to you if you understand why.
smileysteve 3y ago
> it is awful for a person to live in debt Is an interesting premise when data is > American households carry a total of $17.29 trillion in debt as of the third quarter of 2023, and the average household debt is $103,358 as of the second quarter of 2023.
dragonwriter 3y ago
> 32 trillion in debt seems insurmountable, has anything like this ever reversed course historically? If you look at output or income relative, instead of meaningless absolute nominal terms, yes, in fact, the current US debt to to GDP ratio and debt to revenue ratios are a drop from the recent peak—a result of exactly the kind of reversal of course you are asking about.
Exoristos 3y ago
Similar reason it's a bad idea for you to be in debt to Tony Soprano, but not necessarily for him to be in debt to you.
crazygringo 3y ago
Who said it's awful for a person to live in debt? If your salary increases 3% a year every year in real terms, and it's cheap to borrow, then it's absolutely mathematically optimal to carry a level of debt that you never pay off. In fact, you'd be a sucker if you didn't. The main difference between people and government is that people like to retire, while governments can live forever. People ideally need to stop carrying debt at some point in their lives because they need to save for retirement. Governments don't need to do that. It's kind of counterintuitive, but governments don't ever need to pay off all their debt. They just need to keep the overall debt level below a certain ratio to GDP. Debt can keep growing as GDP keeps growing.

kaesar14 3y ago

I don't think it's 'awful' for a person to live in debt. The richest Americans have loads of debt. A significant part of the American Dream is to own a house which is essentially debt. Perhaps the argument is more about whether the US government is drowning in debt more akin to CC debt (bad debt) or mortgage debt (good debt) but in the abstract, leverage is a perfectly fine thing for a government to use in order to fund its development.

logicchains 3y ago
The American dream is to "own" a house, not to own a mortgage.
- anon291 3y ago
  You do not own a mortgage. You have sold a mortgage.
nxm 3y ago
Debt is also how economies and a lot of companies grow
- HideousKojima 3y ago
  They could also grow by saving and reinvesting surpluses/profits
  - intotheabyss 3y ago
    The entire point of debt is to bring future revenue to the present so that you don't have to wait for savings to trickle in every year.
    - HideousKojima 3y ago
      At the cost of some portion of your future revenue
      - airstrike 3y ago
        and if that future revenue is N times greater than you would otherwise get without debt, then it's still better to take on debt. Would you rather have 90% of $1M or 100% of $800k?
        HideousKojima 3y ago
        >if That single word is doing all of the heavy lifting for you. "If" the housing market will never crash, then it's a surefire safe investment! Better buy tons of houses to flip on credit. There's no guarantee that your debt/investment will succeed, which is why banks try (and often enough, fail) to price in risk with things like varying interest rates, collateral, etc.
        airstrike 3y ago
        the 90% accounts for the "if". my point is there an expected value for the future revenue amount, subject to your own assumptions about the probability of each outcome and your discount rate for the value of that money over time in scenarios where your expected value discounted to present value is greater than the alternative, you make the investment. it's really finance 101... it's just NPV
  - grotorea 3y ago
    AFAIK the standard economic opinion is that this is suboptimal and leads to underinvestment.

digitalengineer 3y ago

Small correction: it’s awful for a poor person to live in debt. If you are quite wealthy there are lots of ways to borrow money and it’s all good!

logicchains 3y ago
>If you are quite wealthy there are lots of ways to borrow money and it’s all good! If you have a negative net worth (more debt than assets) you're generally not considered a wealthy person.
- fbdab103 3y ago
  Perception is everything. For quite a while, Sam Bankman-Fried was billions in the hole, but could still secure more funds on demand.
- thaumasiotes 3y ago
  > If you have a negative net worth (more debt than assets) you're generally not considered a wealthy person. That's only true if your debt and assets are both small. If you have $200 million in assets and $500 million in debt, you will be considered a wealthy person. You would only stop being wealthy if your stuff got taken away.
- mikeyouse 3y ago
  There’s no meaningful sense in which the Federal Government could be considered to have a negative net worth.. they have a ‘stake’ in the collective value of the largest and most vibrant economy on earth. People’s conception of the Federal ‘balance sheet’ as limited to the dollars in bank accounts explains why they are continually surprised that $30+ trillion in debt is shrugged off by the market and every knowledgeable economist.
- grotorea 3y ago
  How would you even calculate the asset value for a government? Normally you'd compare it to GDP which is something else.
- 3y ago

teaearlgraycold 3y ago

So I don’t know if what the government is doing is the best long term decision. But the US’s national debt could be compared to a mortgage. And the government’s income is massive so they can be in trillions of debt without it exceeding what they can reasonably pay off (never paying it all off, but paying off individual loans). So by your analogy, is it actually bad for a normal person to be in debt? Normal people have mortgages.

askonomm 3y ago
Has the number ever decreased? As in, have they actually paid things off? Without actual numbers, U.S feels increasingly like a high-school bully who borrows money and then threatens with violence when that money is wanted back.
- l33t7332273 3y ago
  I don’t think US really threatens violence when people collect on the public debt. This is quite rare historically because it makes people weary to lend you money. Payments, including interest, are regularly made and of course individual debts are paid all the time.
- buerkle 3y ago
  The only time the US was debt free was a few years during Andrew Jackson's presidency.
- macintux 3y ago
  We were paying it off at the end of the 90s, some projections had the debt paid off in 10 years, but then Bush 2.0's tax cuts and 9/11 wrecked everything. (I could be off in some details, but I remember my despair when Greenspan gave Congress cover for supporting the tax cuts by testifying that it wasn't necessarily a good thing to be debt-free.)
- metabagel 3y ago
  A better question is whether the percentage of debt to GDP has ever decreased, and it has. https://fred.stlouisfed.org/series/GFDEGDQ188S https://fred.stlouisfed.org/series/GFDEGDQ188S

uticus 3y ago

asking about state-level debt gets into philosophical (and I would argue even religious) territory very quickly, but to answer your questions: 'why...it is okay for the federal government...' federal govt in US is following general patterns at business and individual scale, because democratic processes lead to a reflection of decisions at smaller elements of society at bigger ones. '...ever reversed course historically?' no reversals, but plenty of upheavals, such as war, conquering, etc.

HideousKojima 3y ago

Most explanations I've seen boil down to to "The US (or any other sovereign nation with control over their own currency) can print their way out of debt, it's literally impossible for the US to default." This ignores the devastating economic effects that printing such a huge amount of currency would cause (likely comparable to the effects of simply defaulting) and ignores the fact that sovereign nations with control over their own currency have chosen to default anyway (see Russia ~20 years ago for an example).

dragonwriter 3y ago
> Most explanations I've seen boil down to to "The US (or any other sovereign nation with control over their own currency) can print their way out of debt, it's literally impossible for the US to default." Its impossible for the US to be forced to default. Its quite possible for the US to make a political choice to default, and it has come very close to doing so.
- evancox100 3y ago
  Also, not only is it possible, but many countries have in fact chosen to default on debt denominated in their own currency, rather than subject their citizens to wild inflation and/or break norms around reserve bank independence. So, it could happen even if US is not forced to, I agree. For a starting point, see https://www.bankofcanada.ca/wp-content/uploads/2020/06/BoC-BoE-Sovereign-Default-Database-Local-Currency-Default-Frequency.pdf https://www.bankofcanada.ca/wp-content/uploads/2020/06/BoC-B...
  - dllthomas 3y ago
    Though for the US, it would be clearly unconstitutional.
scatters 3y ago
The Russian rouble was not free floating prior to the crisis. They tried to defy the iron triangle and paid for it. This is not a problem for the USA, since other currencies are denominated in terms of the dollar. The reason it would be impossible for the US to default is that the US is not significantly in debt. Most of the federal debt is held domestically, meaning by the US. You can't be in debt to yourself.

DrNosferatu 3y ago

That’s the Fallacy of Composition - the economics of a government are not the economics of a grocery store or a household: https://amp.theguardian.com/business/2013/nov/21/post-crash-economics-austerity-common-fallacies https://amp.theguardian.com/business/2013/nov/21/post-crash-...

ahallock 3y ago
But imagine if they were. Wars and other destructive behaviors would be a lot more difficult
uticus 3y ago
Sorry, but 'Fallacy of Composition' is just a theory. (Disclaimer: I happen to disagree with it.) Ultimately the way these ideas about economic theory are approached is a lot more philosophical/religious-based (for the Atheists, please read that 'strong belief-based') and a lot less math based than some would be willing to admit. Honestly the math itself is usually statistical, which in turn is a lot more difficult to comprehend and analyze properly.
- HFguy 3y ago
  I would put aside statistics and whether we completely understand how the economy works (we don't). Just ask...are there are very fundamental differences between the finances of an individual and the government? There are. For starters, the government can simply print money and pay off debts. They can also choose, by their actions, to inflate away nominal liabilities. So then it is reasonable to consider that "being in debt" may have different ramifications for the government than for an individual.
  - uticus 3y ago
    > may have different ramifications for the government than for an individual I can only agree ramifications look different when an inappropriately narrow timespan is in focus. Thinking through history, what nations have been able to ultimately avoid ramifications from significant debt – the same sort of scenario that would in proportion cause ‘ramifications’ for individuals or businesses? I can think of several historical instances where a nation having significant debt appeared to have no ‘ramifications’ early on but were unable to avoid the inevitable (and inenviable) outcomes. I mean, even an individual may get deeply – horribly - in debt yet avoid ramifications for a time. But the bills will come due. No doubt a government is not the same thing as a business or an individual. But to dismiss government debt as playing by different rules than debt elsewhere is foolish.

deleted 3y ago

[deleted]

ahallock 3y ago

You can leverage debt as an individual as well. We often shame people for bankruptcies when we shouldn't. Businesses fail all the time and go bankrupt -- running a household is similar and can fail.

HideousKojima 3y ago
Barring difficult to foresee circumstances like an expensive medical procedure, a debilitating injury/illness, or a devastating lawsuit, most of the circumstances that lead to a household going bankrupt are directly attributable to mismanagement.

dragonwriter 3y ago

> Can anyone explain to me why it is awful for a person to live in debt but it is okay for the federal government to do so? Not sure its awful for a person, depending on the kind of debt, but people and the government are differently situated. For one, people (natural or corporate) who have a debt in something that isn't a token that they can issue at will have an externally enforced obligation to do whatever is necess5 to acquire those tokens and sacrifice whatever is necessary to deliver them to the creditor. Currency-issuing governments with debt in their own currency have an obligation to... ultimately, if nothing else works or is desirable, just poof up some currency. Also, for certain governments, there isn't a vastly more powerful external enforcer of whatever obligation they have, whereas with most people, there is, in the form of the local government.

DougWebb 3y ago

I'm hardly an expert, but I think "government debt" and "government investment" are accounted for the same way, but only the former is a problem. If the government sells bonds/T-bills (eg acquires debt) and uses that to improve the country in a way that benefits the citizens and encourages population and economic growth, then its worth doing. If the government uses the money only to pay interest on existing debt, or to give it away to make wealthy citizens more wealthy, or other unproductive uses, then it's not so good. The attacks directly on the national debt are a political strawman, meant to distract from the real issues about where revenue comes from and how it is spent. It's like the constant debt ceiling wailing; Congress sets a budget and legislation that requires spending more than the revenue available, then sets a debt ceiling that prevents the treasure from borrowing to cover the required by law spending, then bitches and moans and grandstands over how the debt ceiling creates a crisis. It's all for show.

TimedToasts 3y ago
> The attacks directly on the national debt are a political strawman, meant to distract from the real issues about where revenue comes from and how it is spent. No, I assure you that those of us concerned about the national debt are actually concerned about it.

nradov 3y ago

It's not awful for a person to live in debt. Debt is a useful financial tool. Unlike a person, a government has an unlimited lifespan and debt can persist forever. This only becomes a concern when total debt exceeds some multiple of GDP. The exact limit will vary based on many factors including interest rates, economic growth rate, demographics, and tax compliance. Once that limit is breached it tends to cause a fiscal and political crisis within a few years. Either default or hyperinflation in the short term, followed by a long period of austerity.

dragonwriter 3y ago
> This only becomes a concern when total debt exceeds some multiple of GDP. The exact limit will vary based on many factors including interest rates, economic growth rate, demographics, and tax compliance. Once that limit is breached it tends to cause a fiscal and political crisis within a few years. This is the kind of theory that, without a concrete model of how the limit varies (or even with one, if it involves much statsitical variability) is nonfalsifiable, either because the probability of a crisis in actual concrete conditions is unknown or the range of variability is too wide to make strong conclusions given the small-n problem with real-world conditions, but at the same time becomes very easy to rationalize almost any real-world conditions as fitting.

intalentive 3y ago

Depends on the productivity of the country and whether the debt can be exported (as reserve currency) or monetized (as inflation). The USA checks all these boxes for now. Highly productive and the costs can be passed on to others. Otherwise you are correct. Zimbabwe certainly has to live within its means.

jmyeet 3y ago

People like to use the household analogy when it comes to government spending and debt. Some cynically do it to justify cutting social programs. Some (and I include you here) are genuinely confused. First, literally nobody in government cares about the debt. Of the $32T debt in our entire history, $8T comes from the 4 years of the Trump presidency. Remember that when the next fiscal hawk starts chirping about the need to cut spending. Second, debt doesn’t matter when you can print money in the currency the debt is denominated in. We borrow US dollars. We print US dollars. So if we’rea household who has to pay out build you can’t ignore it fact that we have a money printer in the next room. There have been sovereign currency devaluations in the past too, famously by FDR who changed the gold standard. I would suggest looking up videos on Modern Monetary Theory.

TacticalCoder 3y ago

> 32 trillion in debt seems insurmountable, has anything like this ever reversed course historically? Never and it is insane that there are apologists for such a sad state of affairs. https://www.usdebtclock.org/ https://www.usdebtclock.org/ This is not going to end well. That's what happen when totally clueless, incompetent and senile people are pulling the levers, following the advices of visionaries like Paul "it will become clear that the Internet's impact on the economy has been no greater than the fax machine's" Krugman. > https://fred.stlouisfed.org/series/GFDEBTN https://fred.stlouisfed.org/series/GFDEBTN What is insane on that graph is that it doubled in ten years and quadrupled in 15 years. Anyone who thinks this is reasonable is simply out of his mind.

uticus 3y ago
The numbers are just outside comprehension. We can comprehend a dollar, or a hundred dollars, in the hand. We may be able to imagine (or have seen) a room full of a couple tens of thousands of dollars. But to extrapolate one, to 32 trillion of the same... If a 4 GHz processor core executes an instruction every clock cycle, it would still take two hours to iterate that instruction 32 trillion times. If you lined up 32 trillion inches, it would be over 505 million miles. If a dollar bill is 0.1 millimeters thick, and you stacked 32 trillion of the bills on top of each other, the stack would be almost 2 million miles high. Etc By the way, we went past $33 trillion in September, and reached $33.5 20 days later. Only a half trillion added in 20 days.

_jal 3y ago

To start with, individuals do not print their own currencies. People always jump in immediately to say you can't inflate your way out of debt/look at Argentina/etc., but that's missing the point, I'm not saying that. The point is a sovereign currency issuer has a fundamentally different relationship to money than mere people. They can certainly still get themselves in trouble through mismanagement, no doubt, but there are a lot of levers they have that are unavailable to normal folks. Like some other major differences: not too many people have massive standing armies or hundreds of millions of tax payers, or control over a substantial fraction of global financial flows. Again, not saying eleventy-trillion in debt is not a problem, or that all's well, or anything else like that. I am saying that comparing private finance to sovereign finance is a category error, and things will make much more sense to you if you understand why.

smileysteve 3y ago

> it is awful for a person to live in debt Is an interesting premise when data is > American households carry a total of $17.29 trillion in debt as of the third quarter of 2023, and the average household debt is $103,358 as of the second quarter of 2023.

dragonwriter 3y ago

> 32 trillion in debt seems insurmountable, has anything like this ever reversed course historically? If you look at output or income relative, instead of meaningless absolute nominal terms, yes, in fact, the current US debt to to GDP ratio and debt to revenue ratios are a drop from the recent peak—a result of exactly the kind of reversal of course you are asking about.

Exoristos 3y ago

Similar reason it's a bad idea for you to be in debt to Tony Soprano, but not necessarily for him to be in debt to you.

crazygringo 3y ago

Who said it's awful for a person to live in debt? If your salary increases 3% a year every year in real terms, and it's cheap to borrow, then it's absolutely mathematically optimal to carry a level of debt that you never pay off. In fact, you'd be a sucker if you didn't. The main difference between people and government is that people like to retire, while governments can live forever. People ideally need to stop carrying debt at some point in their lives because they need to save for retirement. Governments don't need to do that. It's kind of counterintuitive, but governments don't ever need to pay off all their debt. They just need to keep the overall debt level below a certain ratio to GDP. Debt can keep growing as GDP keeps growing.