Poll on the National Debt

We will never eliminate the debt, or even cut it down in a large amount (>50%) without some sort of debt forgiveness. There is literally no way we can repay that amount of money.

Hypothetical way we drastically reduce the debt:


Russia and China enter into a major war. Russia on the verge of destroying and taking over China. China asks US save them in exchange for forgiving all of the debt US owes to China.


Other than that, I see noting coming close to major reduction

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Who believes we will ever eliminate the deficit? I know some debt is good debt but I guess my question is will we ever see it reduced to a manageable amount.

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First things first to clear the air. Deficit =/= debt. Deficit is the amount that the government's expenses exceed revenue. That deficit amount is borrowed to cover those expenses, so that deficit amount then gets added to the currently ~$19 trillion debt.

And with that said, the US federal government will never have a debt level of $0. At the end of 2015, 230 US government agencies hold Treasurys. The various retirement funds held $4.7 trillion. Your Social Security deduction isn't merely handed out to a retired person; it's invested in Treasurys to provide a return. I believe SS can only invest in Treasurys, so if we have a debt of $0, SS would have to be altered or would just sit on cash. The same or something similar would happen to the other retirement funds.

Beyond that, government debt is a vital function of modern finance. It is considered to be a risk-free rate of return to base other investment decisions. Foreign governments and investors hold maybe half of the US federal debt. The rest is owned by US government agencies (including the Federal Reserve) and numerous private entities: banks, insurance companies, individual investors, mutual funds, etc. If the foreign investors were paid off, that wouldn't affect the US too much (besides resulting in excess cash in the global economy that we don't know where it would go), but paying the private entities means modern finance could have to go back to the drawing board. What becomes the new risk free rate of return if the current instrument does not exist or is unavailable in the future?

Honestly, I do think that the federal debt is too high (it exceeds US GDP), but it's difficult to change anything with a population that has a majority of financially clueless people. Most people use wealth and income (and deficit and debt) interchangeably when these terms are entirely different. Fix that, and then maybe we can make changes. I think we should either keep a balanced budget and allow inflation and economic growth to gradually reduce the debt to GDP ratio, or we could go a bit further and produce a 1-3% budget surplus each year. That's about as much as I can hope for at this point.

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China owns 8% of our debt. That is a little over 1 trillion.

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Thats it? I honestly thought it was more than that. Who owns the rest?

quote:

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First things first to clear the air. Deficit =/= debt. Deficit is the amount that the government's expenses exceed revenue. That deficit amount is borrowed to cover those expenses, so that deficit amount then gets added to the currently ~$19 trillion debt.

And with that said, the US federal government will never have a debt level of $0. At the end of 2015, 230 US government agencies hold Treasurys. The various retirement funds held $4.7 trillion. Your Social Security deduction isn't merely handed out to a retired person; it's invested in Treasurys to provide a return. I believe SS can only invest in Treasurys, so if we have a debt of $0, SS would have to be altered or would just sit on cash. The same or something similar would happen to the other retirement funds.

Beyond that, government debt is a vital function of modern finance. It is considered to be a risk-free rate of return to base other investment decisions. Foreign governments and investors hold maybe half of the US federal debt. The rest is owned by US government agencies (including the Federal Reserve) and numerous private entities: banks, insurance companies, individual investors, mutual funds, etc. If the foreign investors were paid off, that wouldn't affect the US too much (besides resulting in excess cash in the global economy that we don't know where it would go), but paying the private entities means modern finance could have to go back to the drawing board. What becomes the new risk free rate of return if the current instrument does not exist or is unavailable in the future?

Honestly, I do think that the federal debt is too high (it exceeds US GDP), but it's difficult to change anything with a population that has a majority of financially clueless people. Most people use wealth and income (and deficit and debt) interchangeably when these terms are entirely different. Fix that, and then maybe we can make changes. I think we should either keep a balanced budget and allow inflation and economic growth to gradually reduce the debt to GDP ratio, or we could go a bit further and produce a 1-3% budget surplus each year. That's about as much as I can hope for at this point.

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I do think we will eliminate the deficit at some point, but not sure how long it will last.

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Having foreign held national debt is a positive foreign policy move


The problem is with our current level of debt and long term sustainability. At current interest rates, our % of GDP interest servicing isn't far off historical averages for all of the 1900s. If interest rates go up significantly however, we have some major issues