EPTThe debt itself isn't really relevant for anything, though. Debt is a problem for other countries, but the US can always inflate out of the debt. The debt is a weird thing to haggle over, because it's only tangentially related to anything that matters. Countries selling oil in yuan because they start trusting China more than the US, for instance. And yeah, if the US starts needing to borrow in yuan or some other currency, because trust has degraded so far that they don't trust the dollar will keep its value. Those would be big problems.
US Politics Mega-thread - Page 5710
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Acrofales
Spain18283 Posts
The debt itself isn't really relevant for anything, though. Debt is a problem for other countries, but the US can always inflate out of the debt. The debt is a weird thing to haggle over, because it's only tangentially related to anything that matters. Countries selling oil in yuan because they start trusting China more than the US, for instance. And yeah, if the US starts needing to borrow in yuan or some other currency, because trust has degraded so far that they don't trust the dollar will keep its value. Those would be big problems. | ||
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dyhb
United States292 Posts
On May 01 2026 14:27 Acrofales wrote: Calling in the debt isn't really a thing anyway. There's contracts. The thing that happens is that the US simply borrows more money to pay off the debts that come due. And bonds come due all the time. The thing is that someone needs to want to borrow money, and how willing people are to take on that debt depends partially on the risk they see of that investment becoming worthless (note that I didn't say not paying it back: the US is trivially capable of paying back all debt that is issued in USD), and the interest payment offered to offset that risk. The debt itself isn't really relevant for anything, though. Debt is a problem for other countries, but the US can always inflate out of the debt. The debt is a weird thing to haggle over, because it's only tangentially related to anything that matters. Countries selling oil in yuan because they start trusting China more than the US, for instance. And yeah, if the US starts needing to borrow in yuan or some other currency, because trust has degraded so far that they don't trust the dollar will keep its value. Those would be big problems. Let me develop and extend this a bit. "The US simply borrows more money to pay off the debts" and "the debt itself isn't really relevant for anything" are true to a certain extent. It's also true that the US spends more on its military than every other country on the planet. However, the US now spends more money on the interest on the debt than on the entire budget of the department of | ||
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CuddlyCuteKitten
Sweden2772 Posts
It's a problem for other reasons. 1) Interest rates. Obviously paying 14-17% of the total budget on your loans is not good and it can crowd out other critical spending. 2) Risk. A large debt is not automatically a problem (looking at Japan...). However that requires interest rates to be low. If they go up things can spiral out of control quickly. Obviously there is also a reduced capacity to take on loans in a real emergency (like a new world war) but that can be handled in other ways. A big problem here is that both US households and private sector also has very high debt making this a double edged risk. Compared to say Sweden which has even higher household debt but low national debt which means if there is massive interest rate hikes the Swedish government can use economic policy to shield citizens when spending goes down. Or the opposite when a low public debt means spending isn't impacted as much when the government has to make cuts. 3) Economic policy capture. At a certain point the central bank can reach a point when they should be raising interest rates to combat inflation but they can't because doing so would hurt the countries economy to much (their secondary mandate). At that point economic policy is captured and inflation can't effectively be controlled. 4) For major powers only. There can come a point for the US when it has to either choose from dramatically reduced spending or runaway inflation. The former threatens global dominance when defence spending is cut, the second economic dominance as a currency with massive inflation is not suitable as the global reserve currency. There are some additional aspects of the US economy that are not good. First of all government spending is already pretty low, 23% of GDP. Compare this to France at 57%. There is no way near as much spending to cut. Secondly the US is already geared for growth. Regulations are low and policies for growth are already in place. So cutting spending and deregulating to promote growth won't be as easy as in other places. Raising taxes is of course possible but will slow growth. It's necessary but ideally you need both or the economy will be hit. I think this is the main reason China is doing nothing. As long as the US is pushing towards unsustainable debt they are content to wait. Once it goes critical and the US is force to react they will see which route they take (inflation or cutting defense) and react accordingly to take that role. I do think this could be solved politically quite "easily". If both parties and all candidates could agree on a) forcing Trump to reduce deficit spending to 4% at the end of his term and b) that the next president and congress will reduce deficit spending to 3% in the first year and 2% at the end of the term that would do it. Then the debates should be about how to do this (cuts vs taxes) instead on if. | ||
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oBlade
United States6102 Posts
On May 01 2026 12:22 WombaT wrote: FDR had some shit to deal with, grew the deficit. Truman pulled it back to basically even stevens. Eisenhower kept it basically there. Kennedy grew it a little, Johnson grew it a little more. These last few were talking deficit/surpluses of a few percent, nothing crazy. Then Nixon made a decent dent in it of a 2.4% narrowing from a deficit of 2.8% that he inherited from Lyndon Johnson Since Nixon, every single Republican President has grown the deficit. Every single Democratic President has shrunk it. I’m sure that’s just fluke or something. It is interesting to be looking at the numbers. Outside of big epochal events,such as WW2 the deficit tended to be floating between 0-3% for quite some time. "Shrinking" the deficit is not enough. Sometimes the deficit is $2 trillion, sometimes half a trillion, sometimes $1 trillion. Obviously half a trillion is best but if the "reduce deficit" approach is limited to being incapable of crossing over to a surplus then you need a new paradigm. There hasn't been a surplus since Clinton and without a surplus you can't reduce the debt which is the main problem. Congress for the last quarter century then hasn't worked out a budget surplus. They either can't or won't. But that's Congress. | ||
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CuddlyCuteKitten
Sweden2772 Posts
On May 01 2026 15:32 oBlade wrote: "Shrinking" the deficit is not enough. Sometimes the deficit is $2 trillion, sometimes half a trillion, sometimes $1 trillion. Obviously half a trillion is best but if the "reduce deficit" approach is limited to being incapable of crossing over to a surplus then you need a new paradigm. There hasn't been a surplus since Clinton and without a surplus you can't reduce the debt which is the main problem. Congress for the last quarter century then hasn't worked out a budget surplus. They either can't or won't. But that's Congress. It would easily be enough if you could run a 1% deficit with >3% GDP growth (as long as that also translates into taxes) for 10 years or so. It would of course be better to run positive budget but it's not necessary. Even a 2% deficit could be enough if you really hard commit to it, like write it into the constitution. At this point it's mainly a political issue. I think you should take a page from the Vatican and lock Congress up every year until they come out with a balanced budget. 😉 | ||
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