(no subject)

[prog]

Assertion: Most Americans have no idea what the national debt is, nor why having a large debt is bad. This despite the fact that anyone plugged into any news source knows that we have a national debt, and that it is apparently very large indeed and growing ever larger. But I don't think anyone in the mainstream news ever stops to go into any more detail about it.

I assert this because I don't know what I means. That it, I know its dictionary definition, but I couldn't enumerate with confidence what trouble we as a nation are inviting by running up such an enormous tab. One could draw parallels between national debt and and personal debt, but this metaphor seems to have little practical application; if the country gets harassing phone calls from foreign bill collectors, we are not privy to it.

I think of this when I see an elegant argument that part of the appeal of the current administration lay in its favoring a borrow-and-spend strategy versus a tax-and-spend one. Rather than taking hard-earned money away from its citizens, it *poof* makes money appear by arcane magics. And isn't that better?

Opponents of Reagan, Bush41 and Bush43 have ever leaned on the horn that shouts the ever-increasing depth of our debt hole. But until there's a national awareness of why any average American should care, I think this effort is wasted.

Comments

[metahacker.livejournal.com]

A national deficit is bad because the money eventually does need to be repaid, and that makes the government beholden to the lienholders. In the case of the current administration, that means foreign countries -- notably, China -- which is upsetting to thoughts of sovereignty. We do, literally, get "harassing phone calls from foregin bill collectors" -- this results in things like Favored Trade Status for China, despite their continuous human rights abuses.

I'll try to dig up more concrete reasons.

[metahacker.livejournal.com]

After consulting with my "sources", someone pointed at this essay; the short answer appears to be, large debt (and therefore large debt payments) leads to runaway inflation, because the Fed prints more money to cover the payments and thereby devalues the dollar.

[dougo.livejournal.com]

Compounding (no pun intended) the problem is that some economists (or at least some blowhard pundits) think that the debt and budget deficits are really no big deal, at least in times of war (or "war").

[mrmorse.livejournal.com]

To the extent that I know anything about this, it's because of Brad Delong and MaxSpeak.

The short version is that as long as global investors believe there's no problem, there's no problem. The US pays the interest on its existing debts and keeps taking out more loans, and that can go on forever.

If global investors start doubting the ability of the US to pay its debts, then there's a problem. They won't be willing to issue new loans to the US, which means the US won't be able to cheaply continue running a deficit, and the whole thing crashes to a halt.

That would be bad, but isn't likely to happen unless the national deficit starts increasing beyond what investors trust the US can pay. The economists I read are surprised that hasn't happened already, but it obviously hasn't, so it's hard to judge the real harm so far of the national debt.

[kahuna-burger.livejournal.com]

Now I have the "Tyrannosaurus ebt" schoolhouse rock running through my head on a continuous mumbled lyrics loop. Thanks. ;P

[xymotik.livejournal.com]

Want to buy a house?
Want to buy a car?
Need to borrow money for college?
Need to borrow money for your business?
Hate the interest rates on your credit card?

All of these are affected by the debt.

When the government borrows a lot, it means there's more competition for the money that investors have to invest. Competition means that those who want to borrow money have to pay more to do so--the interest rates go up, because those who are willing to lend money charge more to do so.

Interest rates affects everyone. If the interest rates goes up only 1% on a $100,000, 30-year mortgage, that'll cost you $30,000 more. There's obviously a lot of money at stake.

There's only one major reason why the interest rates haven't gone up much so far:

Investors, especially east Asian ones, and especially the Chinese, have been dumping money into the US economy. If they stop, we're screwed.

The only reason the US hasn't been a recession for most of this decade is the housing and construction boom. There are a several reasons why prices have rising so much, but one of them is low interests rates. If the rates go up, people can't borrow as much, and housings' price appreciation stalls, and so does the economy.

As for the other major reason why debt is a problem, look in the back of your federal 1040 tax form instructions. There's a pie chart showing the federal government income and outlays. It gives the percentages and tells the total of each.

If you spend more than you make, you have to repay it, plus interest. In fiscal year 2004 (October 2003 through September 2004), the government borrowed about $400,000,000,000. That amount is equivalent to over half of what the government took from personal income taxes in the same year. We're going to have to pay all that back, plus interest.

And the debt the US has racked up *is* being repaid right now. As of FY 2004, just the interest that the government paid on the debt was about $161,000,000,000. That's about $550 for every single person in the US, including all those not working or not paying taxes, like children, those in prison, illegal immigrants, and so on. That's "only" 7 percent of the total the government spent, but it's more than 1/3 of the entire military budget (19% of total spending) and half that of social programs such as welfare, Medicaid and so on (14%). That money is a waste--sure, a lot of it gets paid back to Americans, but it's all just the cost of borrowing money that we didn't have.

There are about 100 million households for the almost 300 million Americans. That means each one is paying an average of $1,500 per year just for interest. You think it's not important? Write me a check for $1,500! Please!

I don't know what the accumulated debt is (a rough estimate would be easy enough to find), but it's in the trillions and all has to be paid back. It must be, because the US government can't default on its loans. Think of what happens when someone goes bankrupt--they're a bad risk and they can't get loans. So thanks to Bush and his Republican House and Republican Senate, who have increased the amount the US government spends while decreasing the amount it takes in by giving most of the tax cuts to those who don't need them, we've been saddled with something over $1,000,000,000,000 of debt since 2000. That's all of going to have to be paid back, coming out to come out of your hard-earned paycheck for next few decades, with interest.

Think of the children!

[radtea.livejournal.com]

Today's debt has to be paid by tomorrow's taxpayers. Once upon a time some people went to war rather than submit to taxation without representation.

So regardless of the economic arguments against large ongoing deficits, there is a moral argument that the next generation has a right not to be saddled with their parent's mistakes.