What are the real-world economic consquences of a huge national deficit?

Question

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

Answer 1

Two words, which a lot of other commentors here seem to have forgotten: opportunity cost. We currently have to spend an ever-increasing amount of the federal budget paying the interest on the national debt. That’s money that can’t go to other things, and over a long enough time it can and will edge out more and more important things from the federal budget. Which means we’ll have to borrow more. Which leads to more interest and round we go, until at some point people lose faith in the government’s ability to service the debt. Then the whole thing crashes.

A bunch of the other commentary here would have you believe this will never happen in the US. I imagine those same people would have loudly proclaimed that Rome would never fall, or the Mongols would never breach the Wall. They are wrong. Unthinkable events happen with monotonous regularity all down human history.

In the short term, every time you see something that the politicians tell you we can’t afford you can, in part, blame the debt. We’re currently paying about $475 billion every year toward interest on the debt. That is a mind-boggling amount of money.

That’s more than enough to pay every student loan, house all the homeless, and pay for every veteran’s medical care. It’s enough money to clean up rivers, give people medical assistance, maybe make a start on expanding Medicare or Medicaid, or shore up the Social Security trust fund a bit. And it’s not going to any of those things *every year*, and moreover a bigger slice of the budget is not going towards those useful things *every year*.

Does this affect you, personally? Yeah, it does. Every time you encounter a bump in our society that money could solve, but doesn’t, it affects you. Every public service you don’t have, every park that isn’t built, every hole in national security, everything that money could solve in our society is a little bit worse because we’re paying this huge opportunity cost. Never let anyone tell you otherwise.