I saw this today:
“The United States federal debt is forecasted to grow to a record 202% of the gross domestic product by 2051, the Congressional Budget Office reported on Thursday, reflecting healthcare and debt services cost growth. The national debt for 2021 is estimated at 102%.”
So I’m curious, if the U.S. is in so much dept (I think a lot of countries are?) How doesn’t it run out of money?
In: Economics
A few things… debt that’s 2x GDP is sort of like a person having a home mortgage that’s 3x their salary — and that’s a pretty common guideline for home affordability. What matters is not the debt in terms of current time period, but what the repayment terms are. Clearly nobody could repay a mortgage that’s 3x their income in a year, but it’s not hard over 30 years. Similarly, the U.S. debt is manegable because it’s owed over time, in the form of bonds with re-payment schedules that are often 10, 20, 30 years. The fact the U.S. dollar is stable and the government always pays back its debts means they can borrow at very low interest rates.
And the government has additional benefits in that it could always raise taxes to help pay back debt, or literally print money to repay them. Much of the debt is because Republicans have focused on tax cuts rather than debt repayment (they only care about the deficit when Democrats are in power), and as a result tax rates are at historic lows — especially for the wealthy. Raises those taxes back to where they were in the 30’s – 80’s and we could pay down the debt more quickly.
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