The national debt is rising every year, and accelerating in its pace too. So what are the implications here? A sharp increase in interest rates and taxes harvested in the next decade or two? Recession? Fed antics like COVID-style money printing?
The only meaningful implication is the emergence of a perception of risk that the government’s debts may not be paid in the long term may cause the international community to diversify into one or more other reserve currencies. Likely the Yuan and/or the Euro. It isn’t like Europe and China are doing amazing economically though or better managing inflationary pressures coming out of the pandemic. I think these implications are more like 50 year impacts not 10 year impacts. It could cause a few wars in the meantime though.
Hmm interesting. I’m so naive to this - how would wars arise? Just as a political byproduct of instability and general anxiety? Or as a straight up, old-fashioned zero sum takeover of resources and asserting political/economic influence (something like taking over a country the US owes a massive amount to)?
Kudos on recognizing you have a limited understanding instead of just assuming that you understand it or trying to apply a false metaphor of personal finance to global macroeconomic principles like 99% of people do. I would highly recommend Ray Dalio’s explainer: https://youtu.be/xguam0TKMw8?si=mvgrNn3qGyRuHRjQ
We are passing the problem to newer generations, let's see if they can solve it
This is the exact thing that motivated me to ask this. I already do not own anything and still have student debt, and this is gonna be the case until my son is close to middle school
Inflation and taxes Due to inflation, social security and real wages will decrease to become useless Due to everyone going into the highest bracket, all of us will pay more taxes
No. Tax brackets thresholds get adjusted with inflation
Can easily be solved by upping the retirement age for social security and Medicare, which hasn’t been adjusted for 50 years. Will probably take a crisis for it to happen though.
You know the interest on the debt alone is $1T right? Tax revenue covers around half of all expenses. Social security and Medicare are presently like 40% of federal budget. Per your logic, if that's how we solve it, retirement age would have to be pushed into the 80s (effectively eliminating SS for non-retired folks), and the people currently drawing benefits would need theirs cut significantly.
The deficit is about 6% of GDP. Social security and Medicare outlays are about 12% of GDP. The deficit is sustainable so long as it equals real GDP plus inflation, so say 4%. So a 2% reduction or about 20% of current SS+medicare outlays, which isn’t that bad. Could also unwind some of the ridiculous trump tax cuts.
No, that amount is peanuts compared to the debt It would also never get approved, would be extremely unpopular
With higher rates now also think of the cost to service the debt. Last I looked debt service cost was 2nd line item in budget behind military spending.
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50T is what expected by 2030. Imagine the inflation and wealth gap.
Sorry - we will easily be over 50T by 20230