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U.S. National Debt Soars to a Record $22T (bloomberg.com)
31 points by pseudolus 35 days ago | hide | past | web | favorite | 60 comments



The national debt belongs to someone, and for them is an asset. The debt is a source of income for some, and when they spend that income they are spurring the economy.

For those unable to print their own money, there is a definite limit on how much debt that one can carry, though the total amount of debt that can be carried varies based on the prevailing interest rates.

On December 19, 1980, the prime rate hit 21.50% [source: 1], and in such situations it is difficult to run up large debts. Right now the prime rate is just over 5%, which makes large debts easier to manage than 39 years ago.

However, the USA government can print as much money as it wants to, and in that sense it can fund infinite debt. It could issue hundreds of trillions of dollars of debt and then print the money to pay the debt. The result would be inflation. For that reason, economists often point out that the only limit on USA government debt is how much inflation people are willing to tolerate. Since inflation has been in decline for the last 36 years, the presumption is that the USA government could print a lot more money, and cover a lot more debt, than it has so far.

[1] http://www.fedprimerate.com/wall_street_journal_prime_rate_h...


Inflation has been lower than it was at the very high levels around 1980, but it has still been greater than zero for every year since, except 2009. [1]

[1] https://www.usinflationcalculator.com/inflation/historical-i...


There's not enough disincentives (punishment) for politicians who jack up debt and pensions. A typical political career having direct power is roughly 7 years. Thus, if you can "borrow" from 8+ years down the road to improve the here and now, it will benefit your personal political career at the expense of the next generation.

We thus have to find incentives to punish existing politicians for debt and future-unfriendly decisions. Maybe require Congress to wear a chicken suit for 1 week for every 1 trillion in debt every year. Embarrassment is a powerful incentive. (An exception may be made for recessions that need a stimulus.)


With all due respect: we heard all that before, except it was from the left, and aimed at the republican excesses of the 1980's. Regan was mortgaging our (I was the teenager then) future and We Were Not Going To Have It.

You know what happend? All those 30 year bonds came to term and we paid the mortgage without breaking a sweat. Hell, we threw in a $2T war on top. Yawn.

US federal debt is almost literally free money. Obsession about spending (oddly always spending, no one obsesses about tax cuts that affect revenue in the same way, though I do note you threw in "pensions" that AFAIK haven't been "jacked up" in Washington in literally decades) hurts, and doesn't help.

Maybe a day will come when US bond rates rise and debt stops becoming free. That's when we need to stop borrowing. Until then this kind of argument is just a political thing that people (mostly republicans these days) trot out to blandly oppose the spending priorities of the other side.


See this graph: https://www.economicshelp.org/wp-content/uploads/2011/08/us-...

Debt is at heights not seen since the War. Our debt is greater than our GDP. Look at that compared to the bump in the 80s-90s.

This is both sides. Everyone keeps spending more. From one of the few who doesn't: "Imagine you and your spouse are hugely in debt from overspending, so you call a meeting & each agree that each of you will spend more.

That's Congress."


You're graphing the wrong thing. Yes, we owe more "dollars" on the balance sheet, but those dollars were borrowed at much (MUCH) lower interest rates. Here's the correct analysis:

https://fred.stlouisfed.org/series/FYOIGDA188S

In fact federal interest payments on the not-seen-since-the-War debt balance is... about as low as it's ever been in the post war period.

In fact the point where it really did get scary and showed a real bump that took a while to correct was precisely the republican spending spree of the 80's. Which we made it through just fine. All that debt you see in that hump? IT'S PAID.

Seriously, amateur economics need to chill out about this. You are being fed a line by your political masters, you just haven't figured it out.


Interest is part of the issue, but $22 trillion is still $22 trillion. And yeah, there's lower interest. But it's still very, very hard to replay.

In other words, interest comprises a few percent of the debt. The debt itself is a huge issue, too.

I'm not being fed anything by anyone. I'm not particularly loyal to either political party. I think both suck. But I also think that's a ridiculous amount of money to have borrowed, and will be very difficult to pay off. And the politicians won't even stop spending.


> Interest is part of the issue, but $22 trillion is still $22 trillion.

I'm sorry, but how exactly does your point work, numerically? If I take out a 30 year mortgage on a home with a monthly payment of $1000 and am given the choice of a balance of $100k with an interest rate of X and $200k with an interest rate of Y, why exactly is it not in my interest to take out the bigger loan? What breaks?

It sounds like you're making a moral point, not a financial one. And while you claim not to be loyal to either party, you're parroting talking points pushed by only one. I think it's pretty clear who has your ear and counts on your vote, and is probably feeding you stuff to confirm your worldview in other ways.


That's an interesting theory, but please test on another country. As a citizen of the USA, I don't personally want to be a debt guinea pig, nor do many others. Theories are nice, but they don't trump empirical testing (no pun intended).


The USA is in the unique position of issuing the world's reserve currency, so we can't really do as you propose.


And how long will US remain the world's reserve currency?


Longer than the term of a 30 year bond, almost certainly. Source: heard all this stuff before, almost verbatim, 35 years ago.


One simpler way of achieving this is to lower the voting age. Younger voters consistently weight the future higher than older voters, because they'll be around for more of it. There are active efforts now to lower it to 16; I would go further and lower it to 10. Combine that with efforts to improve voting accessibility (eg. make election day a national holiday) and you significantly shift incentives for politicians to weight future consequences over present gains.


Oddly, voters of all ages don't seem to care that much about debt. It rarely ranks near the top of concern category polls. GOP harked on it heavily during the O years, and still it didn't catch much traction outside of GOP's base. (Arguably, O was following proper Keynesian timing: save during crest, spend during slumps.)


Unless someone is willing to take on the responsibilities of a legal adult (i.e. full criminal trial, jury duty, binding contract, ability to rent apartment, drink, get drafted, etc.), he should not acquire the corresponding rights. This is to say nothing of education.


I can think of a number of people in high places (including several recent presidents) who should not have the right to vote, then.


In my experience younger voters are more likely to vote for "give me free everything" which drives up the debt.


16 I kind of understand, but do you know any 10-year-olds? I'm not sure we can trust their judgment.


Can we trust the judgement of everyone else then? Voting should maybe expire at some point, like driving licences.

The head of politics at Cambridge University, who you might think would know better, made a more extreme suggestion: Voting for 6 year olds.

https://www.theguardian.com/politics/2018/dec/06/give-six-ye...


When I was 10, I kept track of politics, and my political views haven't changed much since then. I certainly had better judgement at 10 than my grandfather the last time he voted a after living with Alzheimer's for a decade. The learning from voting would be worth a little noise around election results where parents or peers convince kids to vote the way they prefer.


Stop electing Republicans and Democrats would be a start.


A new party would not fix the incentive problem. If a politician's personal career benefits when they do X, they will keep doing X. (Or they observe others getting benefits.) Skinnerbox 101.


This is scary because the more debt one holds, the more accurate one's predictions of the future need to be to manage that debt. What happens if we're wrong about our growth predictions? What happens if we have another market crash (and it's worse than 2008-9)? What happens if we end up fighting a war? I think if the future is uncertain, and it always is, it's a bad idea to hold this much debt.


Relax. The United States could easily pay off its debt if it should be necessary. Inflation makes it cheaper to delay paying it off for as long as possible. There are still debts out there from the 1600s being paid off. In the 2400s, we will likely still see debt from today being paid off, should we be alive somehow.

There will be another market crash, it’s not a big deal it happens every so often and life moves on.

If there is a war, the size and strength of the US Military virtually guarantees we will win.

It’s not so bad. Nothing can touch us.


I agree with the points that you did make, but there are significant tail risks that you didn't mention.

Historically, the usual failure mode for empires that consistently inflate their currency is that those entrusted with the empire's military might become loyal to those who can pay them with hard assets that don't lose value as soon as they receive them, whether it be foreign currency, Bitcoin, land, or private data that they don't want to become public. Basically, you get warlords and mercenaries, and society reverts to a quasi-feudal system. The risk isn't war in the sense of Great-Power conflicts, it's war in the sense of national disintegration, like what happened in Russia, Venezuela, Yugoslavia, Zaire, Somalia, and Rome.


The United States has the greatest reward for those who fight in its military: You are an American hero, a soldier of the greatest most powerful country in the world, and not just because we say so.


This is pretty far fetched. I don't see soldiers demanding gold any time soon when USD still buys lunch and a nice house. Bitcoin? Please.


This assumes the economy and population always grows. If either one of these stop being true, we are left holding a big bag. War, demographics, disease, famine, internet addiction, etc. can derail the pattern.

Some amount of debt is okay and takes this into account. But we are overdoing it.

Ironically, we could "fix" most our debt by allowing in a larger flow of immigrants. You-know-who would do you-know-what in their pants over such an idea.


If the US economy slows down to such a point where our ability to pay down the debt is compromised, doesn't that signal a much larger problem in the global economy that might lead to our debt being re-configured in such a way that the payment load is reduced?


Not sure if sarcastic or very much part of the problem. I do hope it is the former.


How about neither?


Not to go all MMT here, but so what? We print our own money, have the biggest economy in the world, and despite all the pearl clutching we're one of the most stable economies / governments in the world with a lot of highly skilled workers and a reputation for innovation.

If you're betting on governments you can do worse than the US. The absolute number of debt is scary, but do you doubt we'll be able to pay back our dues?


If the global market enters another downturn and the USD falls, the US could actually get downgraded. That would increasing the cost of this debt, and make it more painful to continue with a budget deficit.

Essentially the US is riding on its reputation, but as good as that reputation is, as debt continues to raise relative to GDP international banks may grow wary of loaning, or simply want to diversify if they have a lot tied into US bound debt.


Printing money to fix big debt creates a lot of side-effects and risk, including that of run-away inflation. If you want the US Dollar to mean something consistent, it has to stay relatively consistent.

That being said, inflation has been relatively mild of late such that a little extra "printing" may not hurt much this time. I just don't like printing as a general fix.


It's simple accounting, as interest payments on the debt become an increasingly higher part of the budget, the end result becomes insolvency.

Of course, an actual default for a country like the U.S. is a very unlikely outcome for a variety of reasons. What is more likely, is that inflation is allowed to rise and 'eat' up the debt. The "hope" is that a mild rate of inflation is sufficient to do so. I doubt it though, there have always been periods of high inflation, and there is no reason to think they will not return.


US central bankers have had the opposite problem in recent decades. Inflation rates are below target.


Interest payments get bigger and there's less money to pay for other stuff.


The only thing that's new is that the debt keeps getting higher during growth stage. Previously the idea was we loosen the policy and borrow some money when the economy is slow and we tighten when things are moving better again. But there is no proof that the austerity actually is a good thing for the country or the economy - after a sovereign debt, especially in the case of US which is still denominated in USD is a bit of a fictional concept - an act of law could abolish it, for example. Also the interest rates are still so low that it kind of does make sense to keep expanding the balance sheet further as it's easy to service such low rated debt.


I encourage everyone in this thread to read about Modern Monetary Theory, an economic framework becoming more and more popular among professional economists that provides the clearest way to understand the nature and purpose of the national debt — which by the most sensible measure is much too small.

https://www.nytimes.com/2017/10/05/opinion/deficit-tax-cuts-...


What's the best way to conceptualize the national debt? How does it compare to personal debt, where racking up a high figure would make it difficult to get loans, etc.?


Sovereign debt isn’t the same as personal debt. You wouldn’t want the country to operate with zero debt. With that said, debt is a claim on future productivity. Do you believe that we will be productive enough in the future to service this debt? Or that there will be more workers to pay for this debt than there is today? If not, consider how that changes the risks involved, as well as the risk the federal reserve inflates away the debt (ie your purchasing power drops through the printing of money to pay for the debt).

Politicians today keep spending my kids’ future (both their inheritance and a claim on their time through US tax policy on foreign earned income), and that’s unsustainable.


Assuming climate change keeps going the way it looks like it will, servicing the national debt will be the least of your children's concerns.


So much of U.S. debt is effectively

A) an investment in the future of the country B) future obligations

that it's hard to really compare it to personal finances.

When people are buying bonds it's generally a good sign for the perception of the country, but it obviously tacks more debt onto the ledger.

We tend to look at mortgages differently than, say, credit card debt because it's an obligation into something that ostensibly grows in value over time. One could argue that the same is true of social security and health and human services. You could also argue the cost is lower to fund those outright than to deal with the free-market implications. This is also an (the?) argument for Medicaid-For-All.


The best way to conceptualize it may be via MMT and not attempt to compare it to personal debt because it never gets repaid, the debtor owns a printing press, and so on. MMT is unorthodox as noted in this link but gaining traction. As you note the high debt burden isn't translating into higher interest rates on US debt https://en.wikipedia.org/wiki/Modern_Monetary_Theory (copyedited)


So far, interest rates for US treasury bonds are extremely low. Investors seem more than happy to keep loaning the US government as much money as it has the appetite to borrow.


One thing I often wonder about is how far the world's financial system can be stretched with debt before it just simply breaks. I know it seems far fetched, but could a global debt reset be a thing?


Perhaps there's a strategy to reducing debt in the long run that involves taking on more debt in the short term? Spend money to make money as they say.

Slightly off the beaten path, but:

IIRC, roughly, the U.S began transitioning from a creditor nation to a debtor nation around the time of the Nixon handshake. Some argue that period marked the beginning of the end for the U.S as a superpower. Of course, that result has not fully materialized yet - if it will at all.


i still dont understand how the debt system works. if someone lends you a dollar and expects 2 dollars back - then somewhere in the system the extra dollar needs to exist. All the debt in the world is more than the available money due to interest. So debt can never go away right?


Think of juggling you don’t touch all the balls at the same time.

Debt is useually paid back over time. I borrow 100$ and pay you 1$ in interest and 1$ in principle. You now spend, loan, or invest that 2$ to somone that I can trade somone for to get one of these 2$ to pay you another 2$.

Over time I end up paying you 200$ even if there are never actually 200 different dollars around at any one time.

The only confusing bit is assuming when you loan banks actual money (A.K.A. deposit money) the amount listed in your account is also actual money vs a simple IOU. The difference is only important when the bank runs out, so mostly it’s irrelevant until something unusual happens and it’s not.


Not necessarily. For example, if I owe you two dollars, I can pay you one dollar, you can hire me and pay me a dollar (perhaps the same one), and then I can pay you the dollar again. So a single dollar can pay for two dollars of debt.

The number of times a dollar is spent is called its velocity, and it's on the order of 5, meaning on average each dollar is spent 5 times in a year.


This is not necessarily true for fiat money (currencies that are printed by some entity and can be created from nothing).


Yeah, but it doesn't necessarily have to. If the US can keep servicing the interests on the loans via an economy that's growing proportionally faster than the debt it doesn't matter.


This is one of the best videos to understand the economic machine:

https://www.youtube.com/watch?v=PHe0bXAIuk0


That's exactly correct, from my understanding. Though it's biased, there's a great documentary called 'Money as Debt' that explains the process in an understandable way.


Out of curiosity, do new debt records surprise anybody? We've been running a deficit for a long time now. So we'll have higher debt every year until that changes (or until it all crashes down).


I don't get the impression that this headline and metric is useful.

My understanding is that there are various ways of calculating the National Government's long term and short term financial obligations. This particular metric excludes large underfunded obligations, while containing obligations that are never intended to be paid? The proportion of debt to GDP is also only marginally useful and it is unknown if there is a level where market confidence is shaken. Isn't that the direction all threads on this topic go?


The math: We currently bring in 3.34 trillion in tax revenue per year. Our outstanding debt is 22 trillion with a yearly 2% interest payment of $440 billion.

If the debt hits 174.2 trillion (which is only x8 what it is now) then we will have to spend the entire budget just to make interest payments.

If we default the dollar is likely to collapse. The value of the US dollar is propped up by US Government bonds.


But will this gather enough attention to give Schultz a push? I think Perot based his campaign on something similar.

I'm not sure how this all plays out in the long run. But I often suspect we are stealing from our future (or children's future) with this much debt becoming an "anchor" on future productivity gains.

I think there was older writings about "the work week shrinking" eventually...but it hasn't...is this to make up for the 'stolen' productivity gains needed to pay for increased national debt? Are we in a giant pyramid scheme?


The national debt belongs to someone, and for them is an asset. The debt is a source of income for some, and when they spend that income they are spurring the economy.

For those unable to print their own money, there is a definite limit on how much debt that one can carry, though the total amount of debt that can be carried varies based on the prevailing interest rates.

On December 19, 1980, the prime rate hit 21.50% [source: 1], and in such situations it is difficult to run up large debts. Right now the prime rate is just over 5%, which makes large debts easier to manage than 39 years ago.

However, the USA government can print as much money as it wants to, and in that sense it can fund infinite debt. It could issue hundreds of trillions of dollars of debt and then print the money to pay the debt. The result would be inflation. For that reason, economists often point out that the only limit on USA government debt is how much inflation people are willing to tolerate. Since inflation has been in decline for the last 30 years, the presumption is that the USA government could print a lot more money, and cover a lot more debt, than it has so far.

[1] http://www.fedprimerate.com/wall_street_journal_prime_rate_h...


I hope not. Last thing we need is another third party candidate who would steal votes from the Democratic Party that, of the only two parties that have a chance of having their candidate win, is the one that has lowered the national debt at all In the last 40 years.




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