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Why must we pay off the national debt? It's not like the US Government is going to get old and lose it's income (like a person that retires would). Provided th

Why must we pay off the national debt? It's not like the US Government is going to get old and lose it's income (like a person that retires would). Provided the economy grows (and tax receipts grow along with it) the government has an ever-increasing ability to service its debt. Just look at the ratio of tax receipts to interest on the debt. The recent financial crisis has obviously made it dive a bit, but in general it's been quite steady or increasing over the last half century or so. In the corporate world, this figure is known as Times Interest Earned, and is a generally accepted measure of credit quality of a company. Paying back the principal is less of a concern, because when it comes due, there is always a willing buyer of another t-bill to roll it over. With some pretty charts: http://www.optimist123.com/optimist/2008/12/the-usas-debt-burden-according-to-the-tit-ratio.html http://www.optimist123.com/optimist/2008/12/the-usas-debt-bu...

bprater 18y ago
Why pay off debt? First, it seems like the honorable thing to do. Honor? Right thing to do? In the US? I guess we lost that a long time ago. If money that is servicing debt were freed up, wouldn't it be logical that it could flow to other useful places?
- jwilliams 18y ago
  First, it seems like the honorable thing to do. Paying off debt and defaulting on debt are two different concepts. Most companies are permanently in debt in some fashion.
- Xichekolas 18y ago
  Well the idea of borrowing is that you use the money in useful ways (yeah, I know that is debatable with the government). It'd be splendid if we could pay for everything out of cashflow (tax receipts), but things like wars and economic crises come along and require borrowing in big lumps. You could ask the same thing of any borrower... "wouldn't all that money spent servicing your mortgage or bond issue be better used elsewhere?" ... to which they would reply: "but that mortgage bought me a house, that bond issue allowed us to expand overseas". As for honorable, that is just misleading. The people loaning money to the government aren't victims, they are earning interest on a (virtually) risk-free investment. The national debt is not an expropriation of private capital... T-bills are offered for sale and buyers agree to their terms voluntarily.
3pt14159 18y ago
There will not always be a buyer of another t-bill. What do you think is going to happen when the baby boomers start retiring? Social Security, Medicare, Medicaid all trying to support a glut of population that did not build up a pile of savings, but rather a pile of debt. The Net Present Value (value of future payments deducted for the interest amount) of the US future payments is over 50 Trillion dollars, before the bailouts. That means you would have to have that amount saved, today, earning interest to be able to afford all those programs. Some governments actually do this. Canada, for example, can "pull out the key" of its CPP (Social Security equiv.) and everyone will get out at least what they put in. Not only that but Canada has been paying off its debt for the past 14 years. To prepare for the influx of medical patients Canada is building hospitals all across the country so that when patients actually start coming they can stop building hospitals and start fully running them, without having to find too much extra capital. Where do you think a smart hacker will locate once the baby boomers start to age? In a country that saved and prepared that can keep taxes medium or a country that needs to ratchet them up to pay for their old people?

bprater 18y ago

Why pay off debt? First, it seems like the honorable thing to do. Honor? Right thing to do? In the US? I guess we lost that a long time ago. If money that is servicing debt were freed up, wouldn't it be logical that it could flow to other useful places?

jwilliams 18y ago
First, it seems like the honorable thing to do. Paying off debt and defaulting on debt are two different concepts. Most companies are permanently in debt in some fashion.
Xichekolas 18y ago
Well the idea of borrowing is that you use the money in useful ways (yeah, I know that is debatable with the government). It'd be splendid if we could pay for everything out of cashflow (tax receipts), but things like wars and economic crises come along and require borrowing in big lumps. You could ask the same thing of any borrower... "wouldn't all that money spent servicing your mortgage or bond issue be better used elsewhere?" ... to which they would reply: "but that mortgage bought me a house, that bond issue allowed us to expand overseas". As for honorable, that is just misleading. The people loaning money to the government aren't victims, they are earning interest on a (virtually) risk-free investment. The national debt is not an expropriation of private capital... T-bills are offered for sale and buyers agree to their terms voluntarily.

3pt14159 18y ago

There will not always be a buyer of another t-bill. What do you think is going to happen when the baby boomers start retiring? Social Security, Medicare, Medicaid all trying to support a glut of population that did not build up a pile of savings, but rather a pile of debt. The Net Present Value (value of future payments deducted for the interest amount) of the US future payments is over 50 Trillion dollars, before the bailouts. That means you would have to have that amount saved, today, earning interest to be able to afford all those programs. Some governments actually do this. Canada, for example, can "pull out the key" of its CPP (Social Security equiv.) and everyone will get out at least what they put in. Not only that but Canada has been paying off its debt for the past 14 years. To prepare for the influx of medical patients Canada is building hospitals all across the country so that when patients actually start coming they can stop building hospitals and start fully running them, without having to find too much extra capital. Where do you think a smart hacker will locate once the baby boomers start to age? In a country that saved and prepared that can keep taxes medium or a country that needs to ratchet them up to pay for their old people?