# Deficiets and the National Debt **URL:** \ **Category:** Factual Questions\ **Created:** [January 23, 2003, 8:50pm UTC](https://boards.straightdope.com/t/deficiets-and-the-national-debt/150530 "2003-01-23T20:50:53Z")\ **Posts on this page:** 11\ **Page:** 1
**Author:** ![Netbrian](https://avatars.discourse-cdn.com/v4/letter/n/71e660/32.png) [@Netbrian](https://boards.straightdope.com/u/Netbrian)\ **Post date:** [January 23, 2003, 8:50pm UTC](https://boards.straightdope.com/t/deficiets-and-the-national-debt/150530/1 "2003-01-23T20:50:53Z")
On the news, I often hear of the budget being in deficiet, or how high the national debt has gotten. Due to this, I’ve started wondering, what are the negative effects of deficiet spending on the federal level at this point? And what would be the benifits of paying off at least partially the national debt? My guesses were inflation as a the problem with deficiets, and the benifit to paying off the national debt basically being “ability to borrow more later”. Anyone want to help me on this? (I think it’s a GQ, but if it turns out to be a GD, please move it.) ---
**Author:** ![Jonathan\_Chance](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/jonathan_chance/32/701_2.png) [@Jonathan\_Chance](https://boards.straightdope.com/u/Jonathan_Chance)\ **Post date:** [January 23, 2003, 8:53pm UTC](https://boards.straightdope.com/t/deficiets-and-the-national-debt/150530/2 "2003-01-23T20:53:59Z")
Well, there’s always the impact of federal borrowing on interest rates. If, as NPR says, the feds could run a $300 million dollar deficit this year they’re going to get that money by _borrowing_ it from banks. That means banks have a higher demand for the money they hold and that drives up interest rates for everything from houses to credit cards. Ugh. Maybe they’re just going to refinance the debt like we’ve all done for our houses? I can dream, can’t I? ---
**Author:** ![bup](https://avatars.discourse-cdn.com/v4/letter/b/6bbea6/32.png) [@bup](https://boards.straightdope.com/u/bup)\ **Post date:** [January 23, 2003, 8:58pm UTC](https://boards.straightdope.com/t/deficiets-and-the-national-debt/150530/3 "2003-01-23T20:58:42Z")
Well, the U.S. has to pay interest on that debt (although they can get good rates - people who buy savings bonds are lending the government money at a good rate). According to [The Treasury](http://www.publicdebt.treas.gov/opd/opdint.htm), interest on the public debt was $118,218,487,181.73 last year. What pays that interest? Your taxes. The taxes for an average family of 4 could be $1100 less a year, _permanently_, if that debt didn’t exist. ---
**Author:** ![Nametag](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/nametag/32/406_2.png) [@Nametag](https://boards.straightdope.com/u/Nametag)\ **Post date:** [January 23, 2003, 9:06pm UTC](https://boards.straightdope.com/t/deficiets-and-the-national-debt/150530/4 "2003-01-23T21:06:19Z")
Governments, Uncle Sam included, borrow money by selling bonds. U.S. Treasury Bonds (T-bills) are a safe, if low-yield, investment. They are slightly inflationary, I suppose, but I think the worst impact is the cost of paying the interest. That gets added to the next year’s budget, and if not controlled, the interest alone will keep the deficit growing. ---
**Author:** ![Freddy\_the\_Pig](https://avatars.discourse-cdn.com/v4/letter/f/a587f6/32.png) [@Freddy\_the\_Pig](https://boards.straightdope.com/u/Freddy_the_Pig)\ **Post date:** [January 23, 2003, 11:12pm UTC](https://boards.straightdope.com/t/deficiets-and-the-national-debt/150530/5 "2003-01-23T23:12:32Z")
> [@](#): > > \*Originally posted by Netbrian \* > **On the news, I often hear of the budget being in deficit, or how high the national debt has gotten. Due to this, I’ve started wondering, what are the negative effects of deficit spending on the federal level at this point?** (1) Higher interest expenses later. (2) Upward pressure on interest _rates_ today. \*\* > [@](#): > > And what would be the benifits of paying off at least partially the national debt?\*\* (1) Lower interest expenses later. (2) Less upward pressure on interest rates today. (Downside=higher taxes now, which would depress the economy.)\*\* > [@](#): > > My guesses were inflation as a the problem with deficits . . .\*\* Generally, no. The Federal Reserve tries to keep interest rates low, especially in depressed times like these. To the extent that deficits put _upward_ pressure on interest rates, they require the Fed to create more money in order to do so. But in times of slow economic growth, low interest rates, and low inflation, this isn’t really a problem. \*\* > [@](#): > > . . . and the benifit to paying off the national debt basically being “ability to borrow more later”.\*\* Not really. The debt in relation to GDP hasn’t approached a level where we would become a credit risk. For now, the federal government’s debt capacity is virtually unlimited. (Not _completely_ unlimited, of course, or we could stop collecting taxes. But _virtually_ unlimited.) ---
**Author:** ![MaryEFoo](https://avatars.discourse-cdn.com/v4/letter/m/ba8739/32.png) [@MaryEFoo](https://boards.straightdope.com/u/MaryEFoo)\ **Post date:** [January 24, 2003, 12:22am UTC](https://boards.straightdope.com/t/deficiets-and-the-national-debt/150530/6 "2003-01-24T00:22:30Z")
**Due to this, I’ve started wondering, what are the negative effects of deficit spending on the federal level at this point?** The Administration is (and has been) cutting back in various areas due to the deficit. The proposed cuts are in areas are like in Medicare, Housing, enforcement of certain laws (the Security and Exchange Commission that regulates the Stock Exchanges has been funded such that they can’t hire the number of investigators that has been authorized), etc. This is naturally a huge political issue. You might say that taxes were diverting money from the very rich to the government and thence to certain goals, and now the money will be re-diverted back. Whether this, as public policy, is a negative, is a matter of opinion. ---
**Author:** ![ftg](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/ftg/32/2801_2.png) [@ftg](https://boards.straightdope.com/u/ftg)\ **Post date:** [January 24, 2003, 5:15pm UTC](https://boards.straightdope.com/t/deficiets-and-the-national-debt/150530/7 "2003-01-24T17:15:34Z")
Another upcoming major factor of having a huge debt, or actually a really stupid way of dealing with it, concerns the Social Security Trust Fund. Back in the '80s people finally got concerned about the impact when baby boomers hit retirement age. So SS taxes were increased with the idea being that they were to be put in a trust fund for later payments. Some major idiots (think Enron class accountants) looked at this big pile of cash and thought: let’s “borrow” against the fund and pay it back later. I.e., the money is _spent_, gone, adios. All that we have is a big “IOU”. The article I read earlier in the week predicts 2017 is when it will all go bust. Patrick Monyhan kept trying to get this stopped when he was in the Senate but nobody would listen to him. So the (regressive) SS tax increase that was passed in the '80s, with public support since it was for SS, became in fact Just Another Tax Increase. If you tried to do this, declare that you’re going to put $2000 into a retirement fund each month and then immediately withdraw and spend it, leaving an IOU, you’d be called an idiot. Also keep in mind that having a huge debt really hinders what you can do when a crisis happens, such as having a “double dip recession” along with fighting wars in three areas of the world. Going into the hole when things are good on the assumption that things will never get bad is a naive folly. ---
**Author:** ![ftg](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/ftg/32/2801_2.png) [@ftg](https://boards.straightdope.com/u/ftg)\ **Post date:** [January 24, 2003, 5:17pm UTC](https://boards.straightdope.com/t/deficiets-and-the-national-debt/150530/8 "2003-01-24T17:17:25Z")
“Moynihan”, erg. Wrong button at the wrong time. ---
**Author:** ![Jonathan\_Chance](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/jonathan_chance/32/701_2.png) [@Jonathan\_Chance](https://boards.straightdope.com/u/Jonathan_Chance)\ **Post date:** [January 24, 2003, 7:35pm UTC](https://boards.straightdope.com/t/deficiets-and-the-national-debt/150530/9 "2003-01-24T19:35:20Z")
> [@](#): > > \*Originally posted by ftg \* > \*\*Going into the hole when things are good on the assumption that things will never get bad is a naive folly. \*\* But an extremely common one. You should see how many million dollar homes in my area are now desperately for sale. ---
**Author:** ![bup](https://avatars.discourse-cdn.com/v4/letter/b/6bbea6/32.png) [@bup](https://boards.straightdope.com/u/bup)\ **Post date:** [January 24, 2003, 7:46pm UTC](https://boards.straightdope.com/t/deficiets-and-the-national-debt/150530/10 "2003-01-24T19:46:39Z")
For how much? ---
**Author:** ![Jonathan\_Chance](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/jonathan_chance/32/701_2.png) [@Jonathan\_Chance](https://boards.straightdope.com/u/Jonathan_Chance)\ **Post date:** [January 24, 2003, 8:40pm UTC](https://boards.straightdope.com/t/deficiets-and-the-national-debt/150530/11 "2003-01-24T20:40:51Z")
Less than a million. I’ll tell you that for free.