I know nothing about economics. Is there a consensus regarding effects on the economy if the national debt. were to be paid off?
I know that the forecasted payments to the debt under Clinton admin. were based on interesting math & accounting, but if progress could be made towards that end, what effect would it have on the economy?
Thanks.
We would soon be in debt again because we would have to spend are money on something pointless, very quickly.
The ecomony would be screwed after everyone had to a 100% income tax to pay off the debt.
Ok, not really.
Let us assume that the gov’t continued to offer bonds for investment, but actually had the money to pay it back @ the time of purchase.
If anyone is able to give an educated answer, could you please post your credentials? I’m using this info. to debate w. someone.
I have also searched GQ for similar topics but couldn’t find a clear answer.
Supposedly paying back debt is deflationary, and borrowing money is inflationary. IE, when money is borrowed, it is spent on buying goods or labor that wouldn’t have been bought otherwise. So paying it down makes this funny-money go away.
Economically, borrowing money for military purposes is less efficient for growing the economy than borrowing it for building roads and bridges, factories, software, and the like.
Over what period of time? If we paid it off tomorrow, the economy would tank like nothing we’ve ever seen before.
If it were magically wiped off the books, then I’m afraid that unscrupulous politicians (are there any other kind) would just start all over again.
But keep in mind that debt, in and of iteslf, is not necessarily bad. It’s how you use it that makes it good or bad. Going into debt to buy a house is not bad. Going into debt to finance a trip to Vegas is probably not good.
And this is just one the variables. There is no way to answer the OP. We need to know all the how’s to even start a real debate on this.
And then it will be a debate.
Prez Clinton said this would occur in ten years from now. Best way to answer it is to look at times in history when there wasn’t any debt.
Another idea is to Retire our national debt:
http://mason.gmu.edu/~rwagner/nationaldebt.pdf
Did the authors of handy’s cite consider the interest payments that the government has to pay on its debt? I know that Canada pays an obsene amount of money on interest payments, but I can’t remember how much. Anyone have an exact number?
Why do you say this? Because we would have to tax everybody almost to death to do it?
Theoretically, if it were magically paid off overnight (and believe me, this is not going to happen) then it is likely that the economy would expand. No longer needing to pay interest on loans, the government would have additional income that it would spend partially in the economy. Since they are demanding whatever they are purchasing, this would rise aggregate demand in the economy, which in turn causes expansion.
One problem could be inflation. Simple supply and demand states that with all things being equal, a rise in demand will result in a rise in price. This is inflation, but a competent government should be able to avoid it in this case.
I just had a look at that cite. Its overall message, that a removal of government debt does not directly benefit citizens, is true. However, the way in which it portrays the government as fulfilling a similar role to a bank is a little ambiguous. People may lend the government money, but who exactly is borrowing money from the government?
In fact, it makes far much more sense to imagine the government as a business that is responsible for running the country. You pay a fee (taxes) for the services they provide, in the same way you pay for the services of any other company. People invest in both government and businesses in the form of bonds and shares. The companies take this money to improve their services, and so does the government. Its only that the government usually has more economic weight than companies, their exclusive interaction with the entire population and other obvious power differences that set them apart.
"but who exactly is borrowing money from the government? "
The site said in that case people were just borrowing from other people.
For one thing, everyone who owns t-bills, government bonds and the like would be kind of annoyed. I’m not an economist either, but it’s a point to remember that the debt is to people who buy the bonds and bills, and the interest paid is to those individuals and corporations. People whose retirement funds are invested in govt. securities are glad to have an investment that’s safe and secure.
Here, direct from the Canadian Department of Finance, is the 2003 federal budget. Once you get past the congratulatory crowing about paying off [part of] the federal debt, you get into numbers.
In 2001-2002, “public debt charges” were 39.3 billion dollars, compared to “program spending” of 124.3 billion, and revenue of 171.7 billion. In 2002-2003, the comparable figures were 37.2 compared to 138.6 and 178.7. There is a accumulated debt of 507 billion dollars, which is not growing because of budgetary surpluses. Since the general size of the economy is growing, this debt would be appearing smaller and smaller relative to the total size of the economy. However, this debt is being reduced at a rate of 3 billion dollars per year. Therefore, its relative size is decreasing faster.
The Department of Finance goes on to say that reducing the national debt gives the government more flexibility to choose programs to fund, to reduce taxes, or both. Less money to interest, more to the people. 
The answer, my friend, is blowing in the wind.
The answer is blowing in the wind.