Simplifying Complexity, One Answer at a Time!
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There's literally no way to answer this accurately, completely, and precisely in any reasonable way in a post on Lemmy. So, please take that into consideration as we're all simplifying the answer down to the point where nothing is actually completely 100% true.
That being said: National debt on this order is basically us taking a loan from future generations so we can waste the money now.
Because governments don't tax and then spend. This is a deliberate lie from certain sections of the political spectrum. Governments create money, spend it and then use taxation to offset the inflationary effect the money creation has on the economy, less the deficit.
It's not debt, in the way we would experience it. The debt is actually of human labour which the population works off and is paid for. Money is human-labour standard, as opposed to gold or oil standard, if you actually look how it works in the real world and not dusty academic journals.
The national debt is a lie.
But it's a very fancy one that has a healthy sprinkle of truth in it.
We are $30 trillion in debt.
But we have assets far in excess of $30 trillion that are working to generate profit.
On this massive financial tree we have hundreds of thousands of people siphoning the profit away for their own desires.
The big number is used to make the average person honestly believe that America has an inescapable debt that can never be paid off, and therefore it justifies any shitty financial decision that we make regarding our own citizens.
However, because we have those assets, if we wanted to, we could simply stop paying the national debt and exchange those assets for the outstanding balance and have money left over.
If we did that, it would likely cause a global financial collapse because so many other countries are in on the GRIFT that if the GRIFT were taken away, it would destabilize the economy of the entire planet.
The news glosses over that because it's far better to have a terrified and spiritually impoverished country rather than a bunch of sensible money-savers who focus more on long-term, sustainable, non-disruptible wealth accumulation.
But the national debt is kind of like the outstanding mortgage on a rental property where your tenants are paying off the mortgage for you.
On paper, it may look like you are millions of dollars in debt, but you run that out over 30 years, and not only will that debt pay for itself, but you will also have the original assets that paid for those debts in the first place.
Ergo, making cuts "to reduce the national debt" is a lie and purely serves to punish those who are poor.
Yep, those "cuts" only serve to funnel more money into the hands of the already rich.
America has so much money in the form of financial goods and services at its beck and call that everybody could be "moderately" wealthy and it wouldn't even be a big issue.
People with armchair economics degrees will tell you that if everybody had $10,000 in their back pocket at all times, that a hamburger would cost $100. But that's just not the case.
Any company that tried to make $100 hamburgers the default (more accurately, anybody that tried to make hamburgers that cost 13.5 hours of minimum wage labor the default) would find themselves unable to sell hamburgers.
Not to mention that it is very possible through regulatory means to cap the price of goods and services with a reasonable method. We have computers. We have programs. We have some limited form of neural networks and artificial intelligence that could be used to dynamically price things so that they are affordable for everybody.
Every single obstacle that people love to throw at the average person to explain to them why they have to continue living in Squalor has a very simple solution that merely requires compassionate and capable leaders to implement them.
And we don't do these things because the way we are doing things is the way we've always done things and people resist change.
We’ve always told ourselves this, which is why it’s a problem
Think of it more like a home equity loan. We’re living beyond our means so taking a loan out in the value of our house to pay for it. As we want more stuff, we just take out more of the home equity loan to pay for it. I have $10 but want to buy eggs, so I spend an additional $2 from the home equity loan
We live in the biggest house on the street so people are claiming we can live way beyond our means, unlimited. But there’s always a limit.
But the limit is whenever the bank says it’s too much and we don’t know ahead of time what that is
Is that too much? Not yet, but it’s stupid to keep pushing the limit just to make a few billionaires richer
… and we benefit from being the worlds reserve currency, or we used to. It would be really stupid for a government to mess with that by being isolationist, blanket tariffs and other trade barriers ——- back to the analogy is that our home value is propped up by fantastic landscaping. But we’re letting it goto seed and parking some rusted out cars in the yard, while still claiming we have the best yard in town
It is nothing like a home equity loan.
It's more like a business loan. Actually, that's exactly what it is, is a business loan.
The influx of money has allowed more things to happen that will generate profit through economic activity to pay off the business loan.
The big number bad thing is pushed to make everyone think that America is in financial trouble and therefore makes it easier for them to swallow that they are living in some form of poverty.
That $30 trillion is the value of the economic powerhouse that is America.
It's made to look bad when it is actually good, as long as it is moderately reasonably managed.
The thing is, is we will never pay off the debt.
Paying off this debt would be bad for America.
Even if we did pay it off for some reason, we would immediately begin to accrue more debt because that debt is the cash value of the money influx that we are using to do amazing things, the same way a landlord would not just pay off their rental properties, but would instead, if they found themselves with a paid off rental property, remorgage it, and use the cash value of that remorgaging to purchase another rental property.
And it is also useful as a lie to control the population and to make them think that America has financial problems and therefore to tolerate a little bit more misery in their own lives when it's completely unnecessary for people to be financially miserable.
That misery only serves to increase the happiness of the people who are aware of the fact that it is a lie and have used the lie to benefit themselves.
Some things to consider
Our debt is higher than our GDP and getting into the range where other countries have been forced into austerity - https://worldpopulationreview.com/country-rankings/debt-to-gdp-ratio-by-country
We’re protected by our unique status as the worlds primary reserve currency - but current government actions are weakening that and that benefit can disappear quickly if we don’t return to sanity - https://www.investopedia.com/terms/r/reservecurrency.asp
Interest on debt is the second largest part of annual government expenses - https://www.pgpf.org/programs-and-projects/fiscal-policy/monthly-interest-tracker-national-debt/
While you’re right about debt not being an immediate threat and that there is no hard limit, that’s very different from calling it a lie and not a concern.
An actual limit is determined by the market, by whatever other countries are willing to accept, and by what the alternatives are. Historically US had the largest economy, largest global trade, strong allies and trading partners across the countries with the strongest economy, and some of the largest financial corporations in the world. Economic and financial policy has traditionally been maintained by competent and independent administrators and government policy has generally encouraged world trade. There are solid reasons for our special place in the world economy, but it’s not magic nor should we take it for granted.
Now our debt is getting in range where other countries have had runaway inflation or forced austerity. Our payments are crowding out other things we could do if we could afford it. Our competent and independent administrators have been replaced by yes-men. Government policy is chaotic at best and seeming governed by whim, personal spite, and exploiting the government for personal enrichment. We’re turning away from global trade, becoming isolationist and protectionist, attacking our most important allies and trading partners, abandoning the needier countries. The trigger will be other countries giving up on us and we really seem to be asking for that.
And even worse, what are we getting for that money? Maybe we could excuse greater debt if it is an investment in future business technology or science, or improved well being for our citizens. But we have this huge debt and a century of deferred infrastructure work, the most expensive healthcare in the world while being nowhere near the best, declining health, education and life expectancy. We seem to be actively avoiding technologies of the future.
No the analogy of the home equity loan is more relevant. There is something of value backing it we are exceeding that, but we’re doing so to buy avocado toast and our daily Starbucks instead of fixing that leak in the upstate’s shower, while not being able to afford our medicine or our kids school supplies. There may not be a specific limit but we’re in awfully deep and still digging the hole deeper
Everything’s made up and the points don’t matter. Just like pants on a toll booth operator.
But seriously, if congress doesn’t implement ways to “save” money (aka not spend up to whatever we say the debt ceiling is) and elect to just print more money, the value of the dollar plummets even more. So then we can’t get shit done without spending more tax revenue on our loans (and republicans don’t want to recoup taxes). It’s a vicious cycle.
No organization of scale works their finances like a checking account. Businesses spend money on credit, and make back it + a bit off of the results. This lets them leapfrog a business cycle and do more things now. Credit has allowed big organizations to do some really impressive things.
So, lying a little bit, the government can get credit to do stuff now, and promise a chunk of tax revenue to the people who give it money. The US government does this with treasury bonds. Treasury bonds are sold today, with the promise that the government will pay more money later (from taxes and such). The government does stuff with this money, like maintain roads, build bridges, and improve tax collection - some of these things result in more tax money collected, so the treasury bonds were a good deal for the government. More money now has lead to more tax money later. Because the US government has been extremely good about paying back treasury bonds, treasury bonds are sold at nearly the amount they pay out. (Because of bad policy and covid, they are doing a little worse right now.)
Why do we do this? Many alternatives would have very bad consequences. The government does so many things in the US. If they couldn't get credit, we would get a shutdown every time the government account emptied. Because the people spending the money (executive branch employees) are not the people deciding what to buy (congress), spending and income often do not match up.
It is also certainly more efficient than having huge organizations hoard money until they can pay for things all at once. If everyone in the market did this, we would get wild swings in the amount of dollars available (sometimes several companies would be hoarding at the same time, other times they might be spending out on new buildings all at once).
Can you explain your ten dollars example in a different way?
I give you 10 dollars you give me back 2. So that means I am 8 dollars behind since i just gave you my ten.
The US borrows money by issuing US Treasury Bonds. The number one buyer of those bonds is the US government, mostly the Social Security Administration. We borrow from ourselves and pay ourselves back yet we're told Social Security is insolvent. Yeah I don't get it either
As far as I understand it it's essentially a humongous legal ponzi scheme. When the US gov issues new bonds they are using part of that revenue to pay back the interest on older issued bonds. In order to pay the interest on the new bonds this year, they use revenue from bonds issued next year. Ponzi schemes grow infinitely, so we're seeing the same with the US budget as well.
I mean, the government could run at a surplus and therefore not need to borrow money and start paying back the loans.
Its not really a ponzi scheme, but more that the US government has decided that it'd rather increase its debt rather than reduce spending.
As to OPs question. I think he's referring to taxes and government benefits, but is discounting the fact that taxes are not the only source of money for the government, through bonds the government accrues debts that can exceed the amount collected in taxes.