nwtk2007 Loc: Texas

What does that mean? Who do we owe so much to? What happens to the debt as the dollar decreases in value? Can't we just print more dollars to pay it back??

I am no expert and have been discussing the debt with friend. His take on things seems rather weird to me.

So, from scratch, who knows how it works??

elledee

What it means is we are almost to the point of Argentina when their debt and spending exceeded their GDP.....economic collapse....Thanks demonrats

nwtk2007 Loc: Texas

Isn't a big part of that money we owe ourselves? What is the role of the Federal BAnk in the debt, it being owned by what looks like over a hundred or more smaller banks??

son of witless

I can give you a partial answer. I am no expert, but I will give it to you as I understand it. If the dollar was worth what it was 200 years ago and we had a $ 30 Trillion debt nobody would give us more money and we'd be bankrupt. However, what nations like us do is debase our currency, and thus the debt becomes manageable. As long as you do it in steps, you can do it forever, as long as confidence is maintained.

You might then ask why would anyone, not a total moron ever buy our debt ? Well because the other low risk options are extremely limited. Every country's currency is losing purchasing value. When you have currencies from profit, or wages, or any type of gain that you do not need to currently spend, what can you do with them ? If you sit on them and hoard them you lose to inflation.

You can invest them in stocks, real estate, precious metals, the lottery, your son in law's business and you may gain a lot, but you are taking a risk. Anything that can make you rich can make you poor. Especially if you are old, or you have a short time horizon, your options are limited.

So you buy government bonds or debt. Low risk and you are losing to inflation, but you lose less than leaving the money in your mattress. Again, if the value of your debt goes down over time because of inflation, and the inflation does not get too horrible, and the other low risk alternatives to investors suck even more, investors will buy your debt, and you can keep the bubble going forever and a day.

The however, is inflation becomes hyper, then investors will buy something else that sucks less.

Parky60 Loc: People's Republic of Illinois

I understand part of it but do not see the whole picture. However, this explains it much better than I could and provides some key insight.
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The national debt level has been a significant subject of controversy for U.S. domestic policy. Given the amount of fiscal stimulus pumped into the U.S. economy over the past couple of years, it is easy to understand why many people are starting to pay close attention to this issue. Unfortunately, the manner in which the debt level is conveyed to the general public is usually very obscure. Couple this problem with the fact that many people do not understand how the national debt level affects their daily lives, and you have a centerpiece for discussion.

Before addressing how the national debt impacts people, it is important to understand the difference between the federal government's annual budget deficit, and the country's national debt. Simply explained, the federal government generates a budget deficit whenever it spends more money than it brings in through income-generating activities, such as taxes.

To operate in this manner, the Treasury Department has to issue treasury bills, treasury notes, and treasury bonds to make up the difference. By issuing these types of securities, the federal government can acquire the cash it needs to provide governmental services. The national debt is simply the net accumulation of the federal government's annual budget deficits.

From a public policy standpoint, the issuance of debt is typically accepted by the public so long as the proceeds are used to stimulate the growth of the economy in a manner that will lead to the country's long-term prosperity because current and future generations stand to reap the rewards. But when debt is raised simply to fund the consumption of bloated and useless government agencies, the use of debt loses a significant amount of support.

Because debt plays such an integral part of economic progress, it must be measured appropriately to convey the long-term impact it presents. Unfortunately, evaluating the country's national debt in relation to its gross domestic product (GDP) is not the best approach. Here are three reasons why debt should not be assessed in this manner.

In theory, GDP represents the total market value of all final goods and services produced in a country in a given year. Based on this definition, one has to calculate the total amount of spending that takes place in the economy to estimate the country's GDP.

One approach is the use of the expenditure method, which defines GDP as the sum of all personal consumption of durable goods, nondurable goods and services; plus gross private investment, which includes fixed investments and inventories; plus government consumption and gross investment, which includes public-sector expenditures for services such as education and t***sportation, less t***sfer payments for services such as Social Security; plus net exports, which are simply the country's exports minus its imports.

Given this broad definition, one should realize the components that comprise GDP are hard to conceptualize in a manner that facilitates a meaningful evaluation of the appropriate national debt level. As a result, a debt-to-GDP ratio may not fully indicate the magnitude of national debt exposure.

Therefore, an approach that is easier to interpret is simply to compare the interest expense paid on the national debt outstanding to the expenditures made for specific governmental services such as education, defense, and t***sportation. When debt is compared in this manner, it becomes plausible for citizens to determine the relative extent of the burden placed by debt on the national budget.

While the national debt can be precisely measured by the Treasury Department, economists have different views on how GDP should actually be measured. The first issue with measuring GDP is it ignores household production for services such as house cleaning and food pr********n.

As a country develops and becomes more modern, people tend to outsource traditional household tasks to third parties. Given this change in lifestyle, comparing the GDP of a country today to its historical GDP is significantly flawed because the way people live today naturally increases GDP through the outsourcing of personal services.

Moreover, GDP is typically used as a metric by economists to compare national debt levels among countries. However, this process is also flawed because people in developed countries tend to outsource more of their domestic services than people in lesser-developed countries. As a result, any type of historical or cross-border comparison of debt in relation to GDP is completely misleading.

The second problem with GDP as a measurement tool is it ignores the negative side effects of various business externalities. For example, when companies pollute the environment, violate labor laws, or place employees in an unsafe working environment, nothing is subtracted from GDP to account for these activities. However, the capital, labor, and legal work associated with fixing these types of problems are captured in the calculation of GDP.

The third problem with using GDP as a measurement tool is GDP is greatly impacted by technological advances. Technology not only increases GDP but also improves the quality of life for all people. Unfortunately, technological advances do not take place in a uniform manner each year.

As a result, technology may skew GDP upward during certain years, which in turn may make the relative national debt level look acceptable when it is not. Most ratios must be compared based on their change through time, but GDP fluctuations result in errors of calculation.

The national debt has to be paid back with tax revenue, not GDP, although there is a correlation between the two. Using an approach that focuses on the national debt on a per capita basis gives a much better sense of where the country's debt level stands.

For example, if people are told debt per capita is approaching $90,000, it is highly likely they will grasp the magnitude of the issue. However, if they are told the national debt level is approaching 122.5% of GDP, the magnitude of the problem will not be properly conveyed.

Comparing the national debt level to GDP is akin to a person comparing the amount of their personal debt to the value of the goods or services they produce for their employer in a given year. Clearly, this is not the way one would establish their own personal budget, nor is it the way the federal government should evaluate its fiscal operations.

Given that the national debt has recently grown faster than the size of the American population, it is fair to wonder how this growing debt affects average individuals. While it may not be obvious, national debt levels directly affect people in at least five ways.

First, as the national debt per capita increases, the likelihood of the government defaulting on its debt service obligation increases and therefore the Treasury Department will have to raise the yield on newly issued treasury securities to attract new investors.

This reduces the amount of tax revenue available to spend on other governmental services because more tax revenue will have to be paid out as interest on the national debt. Over time, this shift in expenditures will cause people to experience a lower standard of living, as borrowing for economic enhancement projects becomes more difficult.

Second, as the rate offered on treasury securities increases, corporations operating in America will be viewed as riskier, necessitating an increase in the yield on newly issued bonds. This, in turn, will require corporations to raise the price of their products and services to meet the increased cost of their debt service obligation. Over time, this will cause people to pay more for goods and services, resulting in inflation.

Third, as the yield offered on treasury securities increases, the cost of borrowing money to purchase a home will increase because the cost of money in the mortgage lending market is directly tied to the short-term interest rates set by the Federal Reserve and the yield offered on treasury securities.

Given this established interrelationship, an increase in interest rates will push home prices down, because prospective home buyers will no longer qualify for as large of a mortgage loan since they will have to pay more of their money to cover the interest expense on the loan they receive. The result will be more downward pressure on the value of homes, which in turn will reduce the net worth of all homeowners.

Fourth, since the yield on U.S. Treasury securities is currently considered a risk-free rate of return, and as the yield on these securities increases, risky investments such as corporate debt and equity investments will lose appeal.

This phenomenon is a direct result of the fact it will be more difficult for corporations to generate enough pre-tax income to offer a high enough risk premium on their bonds and stock dividends to justify investing in their company. This dilemma is known as the crowding out effect and tends to encourage the growth in the size of the government and the simultaneous reduction in the size of the private sector.

Fifth, and perhaps most importantly, as the risk of a country defaulting on its debt service obligation increases, the country loses its social, economic, and political power. This, in turn, makes the national debt level a national security issue.

The national debt level is one of the most important public policy issues. When debt is used appropriately, it can be used to foster the long-term growth and prosperity of a country. However, the national debt must be evaluated in an appropriate manner, such as comparing the amount of interest expense paid to other governmental expenditures or by comparing debt levels on a per capita basis.

nwtk2007 Loc: Texas

I was wondering how the diminished value of the dollar came into play? I guess as the value of the dollar decreases then 30 trillion is not like the 30 trillion it was before. How did Biden's war on f****l f**ls effect it. It seems to me that our oil and gas production could bolter the dollar.

woodguru

The roughest part of that debt is that it has an interest payment, the danger being when it gets so big the interest can't be paid without adding more to the principle

Which is what was so stupid about the idea of a tax cut that would go straight to adding to the debt, that tax cut adds more than $10 trillion to the debt, that didn't have to happen

Parky60 Loc: People's Republic of Illinois

Hey dummy, paying interest doesn't add to the principal, taking on more debt does.

And yet the IRS is taking in record revenue and we STILL have a budget deficit.

We don't have a revenue problem dummy, we have a spending problem.

nwtk2007 Loc: Texas

Complicated!

nwtk2007 Loc: Texas

"One problem: Federal revenue didn’t fall after the big Trump administration tax cuts, much less by $2 trillion. Instead, total revenue rose. In fact, after trimming the rates for five of the seven brackets and nearly doubling the standard deduction, the government collected nearly $100 billion more in personal income tax revenue for the year ended Sept. 30, 2018. That was the biggest jump in three years."

https://www.discoursemagazine.com/economics/2022/02/14/in-actual-dollars-tax-cuts-boost-revenue-time-after-time/

Parky60 Loc: People's Republic of Illinois

It's not that bad.

Parky60 Loc: People's Republic of Illinois

I believe that the IRS took in a record almost $5 trillion for the previous year ending in 2Q22.

nwtk2007 Loc: Texas

Easy for you to say. How did Biden's war on f****l f**l effect the value of the dollar and the debt situation??

nwtk2007 Loc: Texas

This is the part I do understand.

GoldBone215

It’s debt and printing more just raises inflation and lowers the value it’s debt to other countries and it will never go down with democrats shoveling money overseas and torching taxpayers right here 🇺🇸🤨 it’s complicated but it’s debt you can’t print and buy it back 30 trillion you have no idea the amount of wasted money and Ukraine is over 100 billion already plus weapons Biden sent 300 million taxpayer dollars to Burundi for t*********r e******y how’s that for making America great again 🙉🚨🤨