Yes this is how the economists involved in the analysis of the sovereign debt and the lending look at this.
The idea that no debt is better than some debt does not have any support in an objective economic or financial analysis. Like for a company, some level of the debt issuance can be useful and more efficient than purely spending from the current cash flows. Especially for the long-term investment needs.
the assertion that a government debt is directly crowding out the private investment is also incorrect. It can, but it is the empirical question as it is not automatically the case, and the stable low return long term bond debt of the government sector is an anchor in the modern investment world, it would not be automatically appropriate for all of the monies that go to the government bonds buying to be diverted to the speculative private investment.
The black and white simple answers will not be correct in response to this question.
The debt hasn’t ever been paid off, and I’m not sure why it should be. I mean, why? If I were immortal and I know my money is worth less later then the interest on it will be pennies in a couple hundred years and my income will be measured in hundreds.
Its been paid down several times but that hasn’t happened since 1957 as near as I can tell*. I figure it just demonstrates that we’re good for the debt, so that it’s easier to sell more debt. Until it isn’t anymore but I have no idea where that bench mark is.
One reason that we should pay is off is that at some point, interest on the debt is going to be an issue. Interest rates are at historic lows, and have been for some time. Even with that, the interest on the debt is about 7%. If interest rates ever increase to “normal” levels, that amount will increase drastically. Then there will be issues that we can’t ignore.
Thanks spifflof. What would be a far too burdensome interest rate/debt? When was the last time the US reached that point? Was it during the Carter administration?
He is talking about the percentage of the national budget to service current national debt levels, not current bond interest rates. It is about 6% - 7% of the total federal budget. That is very significant already and represents one of the top spending categories in the federal budget. That level isn’t a huge problem today but what is alarming is the national debt is rising so quickly that simply servicing it year after year will supersede things like all federal safety net programs combined in the enforceable future if deficit spending isn’t reversed or at least halted.
That is bad because it is a recurring bill that doesn’t ever go away unless we pay a lot more and it siphons off money from things like infrastructure and social programs.
That is why I am always more than a little confused when people claim that national debt isn’t like household debt. It is exactly like it in many ways. It is the same as having a large credit card bill that you only pay the minimum on every month for the rest of your life. It will work but you can’t borrow more and you are paying out good money for something that doesn’t have new benefits.
Perhaps I should have been more clear. As Shagnasty points out, I was referring to the percent of the federal budget that goes to the interest on the debt. Currently, 7% of the federal budget is for interest payments.
My argument is that if the fed ever has to increase the interest rate that we use to fund the debt, that is how we get screwed.
From a Forbes article in 2015:
"Historically, normal interest rates for U.S. government debt is in the range of 4 to 6%. In fact, before the recent recession both 2 and 10 year government bonds had been between 4.5 and 5.25% for the preceding two years. Rates now are approximately 0.5% for the 2 year note and 2% for the 10 year bond. The difference between the cost of the national debt at current rates and historically average ones is enormous.
For the fiscal year 2014 that ended last September, the federal government paid $430.8 billion in interest on the national debt. Back in 2004 with “only” $7.3 trillion in debt, the interest bill added up to $321.6 billion. With only 40% as much debt, the government was paying 75% as much in interest. If the federal government was currently paying an historically average interest rate on the debt, instead of $431 billion in interest the annual bill would be around $900 billion.
In other words, normal interest rates would double the current federal budget deficit and make any effort to contain the national debt far more difficult."
I’m somewhat disappointed that many (virtually all) that have commented here don’t care about the debt. That is my biggest worry in the national calamity area.
You must be really pissed at Obama then!
Partisan politics aside, we have all caused this, Dems and Republicans alike. Any politician who said they were in favor of increasing taxes and cutting spending would never get elected. We have no one to blame but ourselves.
I couldn’t agree more with this. I hate it when straw men arguments are used concerning the national debt. People throw around statements like “the U.S. is going bankrupt we most pay down the debt now” or “that’s stupid, the U.S. is not going bankrupt so let’s build up the debt to increase short-term demand”. The increase in debt is a concern, just how big a concern is open to debate. However, I think it is alarming that many years into the current economic upturn the US Gov’t is still running a deficit of roughly 3% of GDP. This will be shown to be folly in future years.
The major problem as I see it with the build-up of debt is that servicing the debt will increase. It may increase slightly, or it may increase massively, but it will increase. This has a risk of crowding out other important areas of Government spending. At the risk of going off-topic this is also why the coming demographic majority Democrats often embrace will never happen imo. An increased servicing of debt(and the soon to be massive increase in Medicare etc) will obliterate most voting patterns the US experiences today.
I think so. Adding “of the budget” wouldn’t have taken too much extra typing.
And I hope you’re not including me in your “many (virtually all)”:
Blaming the voters is too facile. Voters would vote for free iPhones and free chocolate if you asked them. Our representatives are supposed to be responsible adults. Instead mounting deficits are a deliberate policy of the Republican Party, independent of tax cuts for the rich — as is on display now, they want “budget balancing” to be an excuse for eviscerating programs like environmental protection.
Saying the American people are helpless here is a cop out. Throwing our hands up isn’t the answer. That’s what got us here.
I’m socially liberal and I’m a Republican that votes for both parties as I see fit, I’m in no way a vote Republican all the time. The reason this socially liberal guy became a Republican, is that during my formative years, (1980’s) the only fiscal conservatives were Republicans I’m sure there were Democrats that were fiscally conservative, but I didn’t hear them at that time. So this isn’t some “vast right wing conspiracy.” Both parties and the people are responsible for this.
And using this issues as just another platform for partisan politics is factually wrong and counter production in my opinion.
This is comedy delivered at professional level.
Jimmy Fallon, Steven Colbert, or Seth Meyers would be delighted to have a comedy writer of this calibre on their staff.
Governor Reagan campaigned against President Carter railing & lambasting against deficit spending, and wafting pleasant platitudes about fiscal responsibility, balancing the budget, and paying down the debt.
Then once in office, not only did President Reagan accrue more debt than President Carter.
President Reagan accrued more U.S. federal debt than all the other U.S. presidents before him, COMBINED!!
The Republican demigod Reagan is as much a hypocrite as the current Republicans are.
They talk a great game.
But I wouldn’t buy a used car from any of them.
I’m glad I was able to give you a chuckle. Also glad to know you’re more interested in using funny emoticons than having a substantive discussion.
It would surprise you to learn that Reagan wasn’t the only Republican in the 1980s. I wasn’t a fan of Reagan either. But I don’t remember the Dems concerned about the debt. They wanted to spend differently than Reagan did certainly. But the only ones I remember talking about balancing the budget were Congressional Republicans.
I notice that you didn’t compare Clinton’s debt to the debt that that Bush I had. Nor did you compare Omama’s debt to Bush. I wonder why?
You can continue to bitch about Dems vs. Repubs. Or you can accept that this is an American issue, made worse by both parties, and we are only making this worse for ourselves and our children. Of you can just look for another emoticon.
You are very under-informed. It is the GOP which has been consistently anti-tax and pro-deficit. They’ll make cuts in regulatory programs that contribute little to spending, while increasing military spending and designing programs like the Medicare Pharma give-away. One of Bush’s ideas to cut spending was to lay off IRS auditors — they earn their way 20-fold!
Very under-informed.
Extremely under-informed.
Review this graph. Review Congress’ vote on the Deficit Reduction Act of 1993. Come back when you’re man enough to write “I was wrong about deficit-party correlation” on the blackboard 25 times.
ETA: You write about comparing “debt” to “debt.” If my wife borrows $500,000 and then I borrow another $1000 making the debt $501,000 instead of my wife’s $500,0000, which one of us is the bigger spendthrift?
a) Please don’t guess wildly at how you anticipate I might react.
But if you must, please don’t get it that far wrong.
b) If Reagan was the only Republican, it wouldn’t have been “the Republican party” it would have been “the Republican”, or “the Republican person”.
It wasn’t.
c) I didn’t cite Reagan because he was some random Republican me weak and incompetent mind was only capable of citing.
I cited Reagan because:
Reagan is the Republican demigod.
Reagan SPECIFICALLY campaigned against Carter on fiscal responsibility; yet more Republican hypocrisy.
Beautiful!
Take it up with them.
No matter how hard you try, you’ll never trick me into being an apologist for the Democrats.
Yes!
And they talk a FABULOUS game! Don’t they?
BUT !!
The most recent U.S. president to preside over consecutive ostensibly* balance budgets was President Clinton. He was a Democrat don’t you know.
Because it wasn’t germane to the point I was making.
If YOU have a point to make, I encourage you to do so, rather than sniping at me for not making your point for you.
My point PRECISELY, as I have stated explicitly.
I know they’re fudging Social Security revenues. I’m addressing U.S. federal standards, NOT my own.
I’m not going to spend the day arguing with you, or typing how AMAZINGLY!!! under-informed you are and then trying to make it seem all cool with a neat smiley :D:D
We can also go lies, damn lies and statics on the debt all day. You want to argue percentage of GDP fine. How about looking at it by total debt:
Bush debt increase: $6T to $10.6T = $6.4T
Obama Debt increase: $10.6T to $19.9T = $9.3T
Or am I EXTREMELY UNDER-INFORMED ? by those numbers from the Washington Post, that bastion of right wing journalism? :D:D:D :p:p:p
Or you can quit trying to argue who the F shot Bob, realize that it’s an American issue and if you think if it’s an important issue and what we should do about it.
Does it really make you feel better being about to bitch about a guy who’s long dead??
Who the F cares how we got here??? We are all at fault. What are we going to do about it, when most don’t seem to think it’s an issue at all?
(A) it’s not a matter of “fudging” anything. The surplus accounting simply includes SocSec operations with other government operations, something many Dopers believe to be appropriate and which politicians of any stripe are happy to do whenever it supports their purpose.
(B) Even without that so-called “fudge”, FactCheck.Org claims that Clinton showed a surplus in two years. The same source shows that Clinton had three surplus years even under “accrual” accounting.
These surpluses were largely due to the Deficit Reduction Act of 1993 which passed the House of Representatives 218-216 without a single Republican vote. Many of these Democrat Congressmen “walked the plank” doing what they thought was best for country, and indeed lost their seats as predicted in the 1994 election.
The Deficit Reduction Act of 1993 then went to the Senate where the vote was tied 50-50. Again, not one single Senator from the Republican Party — supposedly the party of fiscal conservatism — voted Yea. Al Gore rose to the President’s chair, voted Yea; Bill Clinton signed it into law. Do your own Googling to find which economist wrote:
“liquidating the deficit ranks as one of the supreme budgetary accomplishments in American history.”
and which wrote
“Without question, the 1993 Budget Reconciliation Bill has been remarkably successful in its goal of reducing the federal budget deficit.”
George Stephanopolis:
“George, back in 1996 Bill Clinton famously said “The era of big government is over.” … Is the era of big [U.S. federal] government back now?”
George Will:
“Big government came back with a vengeance when this administration, this conservative Republican President from Texas expanded the welfare State more, with a prescription drug entitlement, than any President since the liberal democratic President from Texas Lyndon Johnson. The government is doing very nicely thank you in terms of growing. What Newt [Gingrich] is talking about is its competence to deliver. Now Newt is if nothing if not full of confidence and optimism; good. But what conservatives tell you always is we’re always going to over-estimate what government can know, and what government can control. The last thing we need now is a rebuild New Orleans czar, to come in and make grand mistakes on a scale that only government can make them.”
source: ABC-TV * This Week * Sept. 11, 2005, a few weeks after hurricane Katrina devastated New Orleans
(A) it’s not a matter of “fudging” anything. The surplus accounting simply includes SocSec operations with other government operations, something many Dopers believe to be appropriate and which politicians of any stripe are happy to do whenever it supports their purpose.