I’m a middle aged dude with a family, own a house, have four kids, investments, all the adulting things.
However, I’m still not sure how a multi-trillion dollar national defecit seeps down to affect my day-to-day life
In: 492
Well, it depends on where you live. If you live in Greece, then your national debt is pushing your government into austerity plans that will cut public services so that the government can pay higher priority bills, like the police.
If you live in the US, it’s all about taxes (for now). Interest rates have gone up recently (hopefully your mortgage is from a few years back). These higher rates mean the government is spending more of your taxes on interest than on services you might like (like building roads). Eventually, the government will need more money, and your taxes will go up. If not, see above about Greece.
Well, it depends on where you live. If you live in Greece, then your national debt is pushing your government into austerity plans that will cut public services so that the government can pay higher priority bills, like the police.
If you live in the US, it’s all about taxes (for now). Interest rates have gone up recently (hopefully your mortgage is from a few years back). These higher rates mean the government is spending more of your taxes on interest than on services you might like (like building roads). Eventually, the government will need more money, and your taxes will go up. If not, see above about Greece.
Running up debt is way less important than a country’s ability to keep making payments on that debt. In a smaller country than the US, a country could default on its debt, and creditors could impose almost any conditions they want on additional loans (see: Greece). Even without default, the risk of default can make lenders wary of investing, and require higher interest rates to loan the government money. This means more money going to interest payments rather than things the government would like to spend on.
The US specifically is the world’s largest economy and there’s 0 worry that our government will stop making making payments on its debt. So, no one serious worries about catastrophic consequences from our deficit. We’re paying about $500 billion in interest yearly on our debt, which is about 2% of GDP, but a lot (most?) of this is paid to American buyers of govermnent bonds, so it’s not like that money is leaving the country entirely. It’s just not very socially efficient way to spend $500 billion, lol
Running up debt is way less important than a country’s ability to keep making payments on that debt. In a smaller country than the US, a country could default on its debt, and creditors could impose almost any conditions they want on additional loans (see: Greece). Even without default, the risk of default can make lenders wary of investing, and require higher interest rates to loan the government money. This means more money going to interest payments rather than things the government would like to spend on.
The US specifically is the world’s largest economy and there’s 0 worry that our government will stop making making payments on its debt. So, no one serious worries about catastrophic consequences from our deficit. We’re paying about $500 billion in interest yearly on our debt, which is about 2% of GDP, but a lot (most?) of this is paid to American buyers of govermnent bonds, so it’s not like that money is leaving the country entirely. It’s just not very socially efficient way to spend $500 billion, lol
Well, if you subscribe to Modern Monetary Theory, then nothing. If the US has a debt, they can print the money to cover it. I guess, the biggest impact is inflation.
Well, if you subscribe to Modern Monetary Theory, then nothing. If the US has a debt, they can print the money to cover it. I guess, the biggest impact is inflation.
It doesn’t really directly affect your day to day live. There are two things that might indirectly affect you though.
First, there’s only so much money to borrow in the country. Every dollar that the government borrows has to be lent by someone. Usually that’s an investment banker. And if those investment bankers are loaning money to the government, that means that they’re not loaning money to a small business owner, or a large corporation, or a home buyer. This is a drag on the economy.
The other thing to watch out for is that eventually the powers that be are going to decide that the debt really does need to be addressed. That’s going to involve some kind of tax hike, or spending cut, or most likely both. That’s going to affect everyone.
It doesn’t really directly affect your day to day live. There are two things that might indirectly affect you though.
First, there’s only so much money to borrow in the country. Every dollar that the government borrows has to be lent by someone. Usually that’s an investment banker. And if those investment bankers are loaning money to the government, that means that they’re not loaning money to a small business owner, or a large corporation, or a home buyer. This is a drag on the economy.
The other thing to watch out for is that eventually the powers that be are going to decide that the debt really does need to be addressed. That’s going to involve some kind of tax hike, or spending cut, or most likely both. That’s going to affect everyone.
Weirdly enough (in the US) basically no impact. In fact, not having ENOUGH debt would actually be more of a negative impact on your daily life than “too much.” I would encourage you to think of “national debt” as “national investment.”
It really all depends on what we choose to spend our money on and how those investments pay out over time. Something like infrastructure spending for example is money we spend now which gets added to the debt, but the infrastructure we build makes money over time and that investment can easily pay itself back.
Giving billionaires a bunch of tax cuts on the other hand? Well probably not our best bet, they’ll hold onto it or improve Europe’s Megayacht builder market, so we should stop doing that please.
Weirdly enough (in the US) basically no impact. In fact, not having ENOUGH debt would actually be more of a negative impact on your daily life than “too much.” I would encourage you to think of “national debt” as “national investment.”
It really all depends on what we choose to spend our money on and how those investments pay out over time. Something like infrastructure spending for example is money we spend now which gets added to the debt, but the infrastructure we build makes money over time and that investment can easily pay itself back.
Giving billionaires a bunch of tax cuts on the other hand? Well probably not our best bet, they’ll hold onto it or improve Europe’s Megayacht builder market, so we should stop doing that please.
Latest Answers