At what point will the national debt trigger a default?

[Riemann]

If you look at the history of US government debt vs GDP, you will see that

Public debt rose sharply in the wake of the 2007–08 financial crisis and the resulting significant tax revenue declines and spending increases.

History of the United States public debt

Is Obama, who came into office in 2009, responsible for the 2007-08 financial crisis?

[LSLGuy]

Given that Congress approves (and therefore mostly writes) the budget and Congress borrows the funds and sets the debt ceiling it’s probably more intellectually honest to measure debt growth by each Congress than by each President.

We’re currently in the 115th Congress. I don’t know of a good source for debt levels by Congress but I bet it would be interesting to plot. Including which parties were in charge of each one.

[Saint_Cad]

@Little_Nemo

Obviously we can’t pay off the debt in a single year. But the debt could be paid off over the course of several years. Let’s say we raised federal revenues by 25% - a high figure but not an impossible one. We keep all federal spending at current levels. We apply any surplus to paying off the debt.

First off, the new revenue level would be higher than current spending so we’d no longer be running a deficit. The debt would not be getting larger. The surplus would be around 250 billion a year. So we’d pay off the national debt in eighty years. A long period, yes, but not an eternity.

Let’s say we want to do it faster so we cut federal spending by ten percent and apply this surplus to the debt as well. The surplus would now be over 600 billion a year. With that, we’d pay off the debt in thirty-three years.

Good analysis but fails in the harsh light of reality. Let’s say we increase revenue by 25%. Congress will use that as an excuse to increase spending 28%. The true answer is to be a Keynesian - no not the current model of SPEND SPEND SPEND but save money (pay down the debt) in good time in order to have deficit spending in bad time which could be done if cutting spending was linked to higher taxes.

[Riemann]

The key is confidence in the creditworthiness of the US government. So long as the US can borrow money at around the rate of inflation, the notion that paying interest on the existing debt increases that debt is mistaken. The size of the existing debt remains the same in real terms.

So it’s not a problem that cannot be solved if there is a will to do so. Provided confidence is maintained, moving the budget into any kind of surplus does reduce the deficit in real terms.

[Riemann]

*reduce the debt in real terms

[Little_Nemo]

@Saint_Cad

Good analysis but fails in the harsh light of reality. Let’s say we increase revenue by 25%. Congress will use that as an excuse to increase spending 28%. The true answer is to be a Keynesian - no not the current model of SPEND SPEND SPEND but save money (pay down the debt) in good time in order to have deficit spending in bad time which could be done if cutting spending was linked to higher taxes.

I’m not seeing the difference between what I said and what you’re saying.

[DrDeth]

@Silver_lining

Nothing I wrote was wrong on the debt. I was merely saying that the amount owned greatly exceeds the amount printed in circulation.

A true statement.

The debt accumulated under the Obama administration, more than all other presidents combined is also a fact, not fiction.
.

Meaningless fact. Like how many miles all the dollar bills would be if laid end to end.

The debt accumulated under a Republican Congress. The President does not control the budget. Try this little thing called The Constitution sometime. It’s a fun read.

[Snarky_Kong]

@Riemann

If you look at the history of US government debt vs GDP, you will see that

History of the United States public debt - Wikipedia

Is Obama, who came into office in 2009, responsible for the 2007-08 financial crisis?

The fact that the debt would have exploded under any president, that the increase in debt had nearly nothing to do with Obama, that it’s not a historically abnormally large amount of debt, it’s very cheap debt to the point of being free, and that the US can easily pay it down with sane policy will NEVER be acknowledged by those whose entire political identity is “GOP good, Democrat bad.”

They also stopped caring about the debt immediately after Trump was elected. That or the debt will only increase under Trump because of the horrible horribly mess (very strong economy he was left.

[Saint_Cad]

@Little_Nemo

I’m not seeing the difference between what I said and what you’re saying.

You assume that an increase in revenue does not increase spending even more given the current political climate. I am also disturbed that your first analysis is to raise revenue and keep spending the same and only at the end consider reducing spending.

[race_to_the_bottom]

@Lumpy

We’ve already reached the point where we can’t stop borrowing money; if government borrowing stopped tomorrow, the lack of funds would trigger chaos. But logically the national debt cannot rise forever- eventually at 30 or 50 or 100 trillion dollars the government’s entire tax revenue will equal interest payments on the debt. So when is Doomsday at the current rate?

There is no limit. Note that the Federal Reserve has purchased about 2.5 trillion in Treasuries since the 2008 crisis. It receives interest on these bonds from the treasury, which it then remits to the treasury. I kid you not.
“The Federal Reserve Board on Tuesday announced preliminary results indicating that the Reserve Banks provided for payments of approximately $92.0 billion of their estimated 2016 net income to the U.S. Treasury. The 2016 audited Reserve Bank financial statements are expected to be published in March and may include adjustments to these preliminary unaudited results.”

In principle, the Fed could buy up EVERY t-bill as well as everyone’s mortgage note. In fact, if it did so, it could decide to burn everyone’s mortgage tomorrow.

As far as worries about government spending causing inflation, that can only happen if the extra spending puts pressure on resources the economy needs like steel and labor. There is lot of mythology out there about hyperinflation, and it is all bullshit.