US debt levels : worrying or not

Personally, I believe they’re worrying. No country in the world is immune to debt. With that being said, neither party seems to care - I recommend you vote for local leaders who will commit to common sense budget and spending practices. Also, really the only way to balance the budget is to scale down our military spending, but the only other country willing to take up our mantle in that respect is a communist, one party, authoritarian state. I shudder to think the world under Chinese military rule.

The debt is crazy high but as long as there is demand for the dollar, the fed has ammunition to keep interest rates low without worrying about inflation, and so the debt is less of an issue. People gotta put their money somewhere so in a sense it's all relative. If other countries/regionds are more f-ed up than the US, the US debt can keep climbing. And as is, the US is still the best place to park large amounts of money safely.

Yes, it's very worrying. We will eventually get to the point where our entire budget is snuffed out by debt payments and we will have to cut spending and raise taxes, slowing economic growth even further (3% seems to be the very high end of what can be achieved with 2% kind of the standard right now, so slow growth relative to 2%).

The U.S. federal government has something like $130 trillion in assets. My plan would include selling enough assets to bring debt down to 50% of GDP, cut spending 1% across the board every year until we balance our budget, radically attack waste, fraud, and abuse (which around $400B across domestic and military spending), implement a VAT tax, increase the retirement age, and remove the income limit on the payroll tax. To offset slow economic growth policies of tax increases and spending cuts, I'd unilaterally eliminate all trade barriers, liberalize banking, and gut regulation.

My plan would get me thrown out of office in about 2 seconds, if I was ever elected at all. In other words, I think the collapse of the U.S. in the coming 50-100 years is inevitable. The Roman Empire collapsed, in part, because Rome spent itself into poverty, couldn't maintain a sizable army, and, as a result, was assaulted by countless outside attacks. For the U.S., our debts will eventually ground our economy to a standstill and snuff out domestic expenditures (education, infrastructure), causing dissension and eventually dissolution of the republic as states break away. Before that, our inability to maintain a sizable military will salt away our influence in the world, slowly but surely over time.

Zero problems until FED can do brrr

Consumers, corporations, and the government are all jacked to the tits with completely unsustainable levels of debt, and now we’re in a recession in the middle of a global fucking pandemic. What could go wrong?

For me, the most significant issue with tripling our deficit is how we are going to finance it. We should take the money from existing outlays such as the military and possibly increasing the age of eligibility for collecting social security. It would be a big mistake to fund it by issuing more debt. Assuming higher debt levels, might lead to the ratings agencies downgrading US Treasuries, which would would make the situation worse.

I would call it highly problematic but one step short of alarming.

Our debt is 1.1x GDP. From a world ranking perspective, that's bad. It puts us in the same class as the more profligate and value-destroying European countries like France, Italy, Portugal.

On the other hand, its only half Japan's level. We see what Japan has done the last few decades . . its been bad, they had the lost decade, but not quite the ruin of a nation either.

Furthermore, some adjustment needs to be made for the fact that will be continuing high demand for dollars as so much international debt is denominated in USD. That deflationary force gives us more room to inflate away our own debt while still ending up at net neutral inflation.

Another small adjustment that should probably be made is national wealth. In addition to our cash flow (GDP) we have a base of citizens that has higher than average wealth. This is not a huge consideration because the measurement of their wealth is somewhat co-dependent on all the money printing we've already done. But its a small consideration.

Lastly, our ability to grow GDP may be better than other countries if we can remain the top spot for the world's biggest tech companies and innovation generally. Yes we are losing a ton of ground to China and others, but if our GDP growth will remain above our fellow 1x Debt/GDP colleagues (France Italy etc) then that's another reason we're not quite like them.

Ultimately, I do believe some reduction in standard of living is needed. If we can be smart and do it now, it can be smaller. Push up retirement ages, take a harder look at the defense budget, do more efficient social programs, stop making college the investment of a lifetime, etc. Very solvable problem if any politician is wise enough to confront it.

Problem is, most politicians only want to tell people what they want to hear, and nobody wants to be the guy who said some cutbacks are needed. Need someone in charge who is incentivized by the opportunity to save the country but only get credit for it 30 years later.

I hope you guys are ok (and your kids) paying 40-50% taxes in the future. That’s the only way and it’s inevitable.

Debt levels certainly a long term problem and will force very hard choices and likely will create internecine warfare between gen-x and millennials, as well as haves and have nots, in the next 20-30 years. As it stands currently the US on a relative basis is in much better shape than Europe and Japan with their aging populations and huge social welfare spending, regulatory burdens etc.

However, outside of finance you have generations completely brainwashed by progressive propaganda that would make Lenin envious, believing the Nordic countries are some kind of secret economic miracle and they do not have the mental faculties to recognize the flaws in using them as an analogy (as well as the fact that those countries are trying to reduce their social welfare spending). These countries were able to do this because a confluence of rare factors. Social, cultural, language and religious homogeneity which that factors such as waste, fraud and abuse in their safety nets, something the US and the rest of Western Euorpe lack. Even now, despite, how you may feel morally or politically about immigration, the social fabric of the Nordic countries is tearing, and the shared cultural values that held the system together are severely strained. Also, low birth rates, aging populations, increasing high health care costs, along with generous social welfare policies that are now being exploited on a scale not previously seen they are looking towards market/capitalist solutions (they have marginal tax rates so high they cannot use the magic tax the rich that US liberals hold up as gospel). The low levels of entrepreneurship and capital formation as the result of high tax rates and regulatory burdens, make it hard to generate the needed growth for these countries. The US's economic dynamism gives it a distinct advantage to potentially grow it way out of its problems in conjunction with entitlement reform.

Steps for the US to take would be to increase the age for social security and means test it. Freeze non discretionary (entitlement) spending at a certain level of GDP. Immediately make it illegal for drug companies to sell their drugs to foreign countries for less than in the US (adjusted for purchasing power parity) US consumers subsidize national health care in the UK, Europe, Nordic countries etc (drug reimportation schemes reveal the sheer ignorance of static progressive thinking) . Drug prices would rise there and fall here. Finally we must either charge Europe a tax for use of US military assets in NATO that fully reflects our cost. They have no meaningful air or sea lift capacity or rear echelon support infrastructure such as in flight refueling, logistical transport etc. We need to stop wasting our hard earned blood and treasure on Europe and endless wars in the middle east that can never be won.

But make no mistake, you wont get us out of debt by cutting the military like every ignorant liberal believes. You need to address entitlements which is politically impossible as we have a country of whiny babies who want their bottle and want it now and would never sacrifice for real. They buy a Tesla an virtue signal their climate righteousness, with factoring in the mining of cobalt (child slave labor in congo with no environmental protections) lithium mining which is hugely destructive to the environment, and requires 500,000 gallons of water to produce just one ton of lithium. The met coal required for steel, and the oil/gas products required for light weight, high strength carbon components or plastics/resins used in seats, dashboards etc. If we installed electric batteries in every care and industrial/solar wind farms what is the environmental damage. Again the so called educated progressive is incapable of processing these factors and just like religious orthodoxy is unwilling to abandon the feeling of moral superiority they get from being climate zealots.

I can tell you this, you cannot have the climate righteousness the progressives are seeking and a solvent and dynamic economy. The costs of their climate righteousness will only increase the burden on the poor and create more economic stagnation and wealth inequality. But what is that in comparison to the great feeling of moral superiority one gets from using their brain and making difficult choices regarding allocating scarce resources.

Debt levels are concerning but when we look at interest payments as % of GDP, its not as horrible due to chronically low interest rates for the last decade and even beyond that (due to demographic trends). So (i) interest payments are as troublesome and as long as interest rates stay low (which they will), economists won't be too worried. (ii) high debt is a worry for countries that do not print their own currency because it is possible for them to default on their debt. The US will not default on its debt as it can always print more. This brings me to (iii) printing cash to service the debt will cause inflation to increase which is the main worry of rising debt levels. With the persistently low inflation we have now, that's less of a worry. For economists and policy makers alike, they would rather deal with slightly higher inflation than slower growth and higher unemployment. The virus has demonstrated just that. Policy makers will throw money at the fire to help people stay afloat. Will inflation increase a bit? Maybe. Are they willing to take that risk? 100% yes

All of the people with the most influence over fiscal spending will not be around to pay it off because they’re so old. Debt being racked up now by baby boomer politicians who are spending like crazy will really impact our generation. It’s like being at a restaurant, and old people eating like everything is free because they’ll be dead by the time the waiter brings the bill out.

The absolute level of debt doesn't really matter, interest coverage is what matters. With rates where they are now and I think they will be low for a long ass time after this pandemic is over (would you voluntarily raise your borrowing costs? Would anyone?), the debt can probably be sustained at a much higher level than where it is right now.

I think that this approach to monetary policy is long-term very destructive for the average citizen in that pensions no longer exist (when IG debt paid 6,7,8% everybody and their mom had a pension plan) and people are forced into riskier assets if they want any semblance of a return, meanwhile almost everybody from the average Joe to large institutions are in much riskier asset allocations than they realistically should be because it's either that or they have no shot at hitting their return targets, and then some black swan event (like a pandemic) happens, everybody is maximally fucked in terms of their savings and retirement plans. The as-low-as-possible approach to interest rates of course drives the price of real estate sky high, insurance is more expensive since they are a big part of the institutions who need to make money from safe investments, and beyond a certain level ceases to have any beneficial effect on the real economy even without taking into account the above issues.

So the economy slows, people need to work more, their dollars buy less as increased real estate prices and associated taxes etc. are passed onto consumers, the NPV of saved and invested money is jack shit, and tax bracket thresholds do not increase to reflect the amount of price increases that require wage increases to induce people to work to make enough money to buy the price-inflated real estate and other products that the Fed created in the first place. So then the economy is slow, so lower interest rates again. Rinse and repeat until capitalism is dead.

In all seriousness in these conversations can someone tell the difference between - 0% government debt 0% Cash

Government debt starts to look a lot like just cash when rates are low. And to a great extent the rise in government debt is just a desire by society to hold more cash.

Two things are neglected here. Firstly, net US debt is lower than gross debt because a large number of US Govt bonds are held by the Fed. Govt holding claims on Govt means the positions can be netted. Secondly, as long as average nominal GDP growth exceeds average nominal interest rate on debt any level of debt is sustainable. Easily shown via calculations. And because US has the right to seignorage I doubt a speculative attack is likely. Debt dynamics simply are different when an entity can print it's own money. Sure there are some constraints but there are more degrees of freedom for certain. So applying corporate logic to a macro situation is not necessarily the right thinking.

I remember reading in Financial Times a few years back that the UK had finally retired the last of England's debt that was accrued during the Anglo-Spanish War (1585–1604).

^Why does this matter? Because it shows governments can finance debts over hundreds of years. While I do believe the US should be wary of going too deep with deficit spending, the notion that the US federal government is going to go bankrupt or can't afford to finance its debt is laughable. Too many people view government finances through the lens of a household, while in reality they're not even close in comparison.