National Debt

National Debt:

Intro:

To be clear, this issue is not polarizing among parties, and is more accross individual beliefs.

The US government’s national debt has reached up to $38.5 trillion, a historically unprecedented number. Currently, just for interest rates on the national debt, the US has to pay $1 trillion dollars every year, or the debt will just get higher.

Focus on Debt:

The main reason to focus on this is to keep the US economy running. If the US government does not pay its debts, then many will stop buying bonds. In the last year, the US issued up to $2.25 trillion in bonds. While this increased the national debt, without this money, the US could not run to the same extent as it has.

Currently, just keeping the cost the same, the US government spends more on its interest on its debt than on everything but social security, healthcare, and possibly military spending.

The US actually crossed its debt threshold a while ago, but the Treasury Department has been using "extraordinary measures" to put off missing payments. This is similar to the way that households used to float checks, sending someone a check before they have the money in their bank account to pay, and hoping that they can move enough money in before the payee actually deposits the check. This is not sustainable, however, and if they continue to do this, many believe that it could lead to drastic economic harm.

Defaulting on their debts would likely cause massive stock crashes, people would stop lending money to the government, forcing more shutdowns, and the economy would end up worse than in 2011, which was the closest to this happening.

Don’t Focus on Debt:

Governments operate differently from people, and as such, we cannot view their debt obligations in the same way.

Governments must service their debts, which means to pay interest and repay principal when bonds are due – but they don't technically have to pay them off; they can just issue new bonds to pay for old bonds, and they can even borrow to pay the interest as long as overall debt doesn't rise any faster than their revenue.

Though the debt-to-GDP ratio stayed at about 97% last year, interest payments on the debt were only around $395 billion, according to the Office of Management and Budget, which is about 1% of last year's GDP.

It's also very unusual for governments to pay off large debts. An example of this was the case for Great Britain, which barely paid off the debt it incurred as far back as the Napoleonic wars.

Questions:

• How should we view government debt?
• Should we allow interest rates to increase?
• Should we cut down on the bonds we sell?
• Should we just stay where we are?
• Should we pay off some of the debt?