I understand that it’s not. But I also understand that the government is currently paying a trillion dollars every year just on interest. And that countries are reconsidering the dollar as a stable reserve currency.
National debt isn’t the same thing as other kinds of debt but you can only go “money printer go brrr” for so long before consequences start to show up.
What I am going to say definitely does not apply to current USA but there are also downsides to having no debt. If a country’s economy outgrows the debt, the debt shrinks and results are positive. This is not hard when a country doesn’t have something weighting it down like covid or right wing populists. Countries also want to own each others’ debt, so they can use their currencies whenever needed. When USA was predicted to wipe off its national debt it was optimal to keep some of it for those reasons and to also keep USD the main world trade currency.
If a countries economy outgrows the debt the debt shrinks and results are positive.
Yes, this is why it’s worthwhile for the government to take on debt to invest in the economy. If the government, say, builds a state-run grocery store, that store will grow the economy, potentially at a fast enough rate to offset the interest on the debt. This creates a “virtuous cycle” where taxes generate social spending, which generates economic growth, which generates more tax revenue.
I understand that completely.
This does not mean that there’s no problem with the government wracking up massive debt by, rather than building grocery stores or things like that, by throwing a bunch of money into a giant hole in the ground and setting it on fire. Which is exactly what military spending is. Spending a trillion dollars a year to build absurdly expensive bombs to drop on random Middle Easterners for no reason and to accomplish nothing adds as much to the economy as paying people to dig a ditch and then fill it back in. It is a complete waste of money, or, more accurately, it is a process of transferring public funds into the private hands of the military industrial complex (where plenty of politicians coincidentally own shares). The massive debt that we’ve accumulated through this wasteful, corrupt spending has not been the result of investing in a virtuous cycle. Yes, there is some economic stimulation from paying people to make bombs but it is much, much less than we would get from paying people to build trains or stores or really anything that actually provides a lasting benefit.
More people should learn how national debt actually works. People equate it to household debt or business debt too often.
I understand that it’s not. But I also understand that the government is currently paying a trillion dollars every year just on interest. And that countries are reconsidering the dollar as a stable reserve currency.
National debt isn’t the same thing as other kinds of debt but you can only go “money printer go brrr” for so long before consequences start to show up.
What I am going to say definitely does not apply to current USA but there are also downsides to having no debt. If a country’s economy outgrows the debt, the debt shrinks and results are positive. This is not hard when a country doesn’t have something weighting it down like covid or right wing populists. Countries also want to own each others’ debt, so they can use their currencies whenever needed. When USA was predicted to wipe off its national debt it was optimal to keep some of it for those reasons and to also keep USD the main world trade currency.
Yes, this is why it’s worthwhile for the government to take on debt to invest in the economy. If the government, say, builds a state-run grocery store, that store will grow the economy, potentially at a fast enough rate to offset the interest on the debt. This creates a “virtuous cycle” where taxes generate social spending, which generates economic growth, which generates more tax revenue.
I understand that completely.
This does not mean that there’s no problem with the government wracking up massive debt by, rather than building grocery stores or things like that, by throwing a bunch of money into a giant hole in the ground and setting it on fire. Which is exactly what military spending is. Spending a trillion dollars a year to build absurdly expensive bombs to drop on random Middle Easterners for no reason and to accomplish nothing adds as much to the economy as paying people to dig a ditch and then fill it back in. It is a complete waste of money, or, more accurately, it is a process of transferring public funds into the private hands of the military industrial complex (where plenty of politicians coincidentally own shares). The massive debt that we’ve accumulated through this wasteful, corrupt spending has not been the result of investing in a virtuous cycle. Yes, there is some economic stimulation from paying people to make bombs but it is much, much less than we would get from paying people to build trains or stores or really anything that actually provides a lasting benefit.