[quote name='Promit Roy' timestamp='1303086610' post='4799671']
Assuming paying off the debt is even a reasonable thing to do. It isn't. Don't try to 'compress' macroeconomics to every day sizes, by the way. It is dramatically misleading.

Huh? Family or no, I would think not having $14 trillion in debt is a good thing. I know that our current economic system is based on "having debt", but not that much debt. What did i miss here?
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The debt is simply another way to look at a large amount of wealth in private hands. For the US government to pay off its debt, it has to destroy wealth in private hands. You may want to do that, but then it's important how you go about it, and in which way the economic pressures flow. Basically, if your goal is to reduce the US government debt, this will most likely fail, because the method by which this is attempted is typically to make the economically bottom 95% bleed, whereas the relevant part of the wealth is really in the top 5%. If, on the other hand, your goal is to destroy the wealth of the top 5% and you go about this in an effective way (via property taxes etc.), then you may well be successful in reducing the government debt. But you do have to keep in mind that the debt does not only correspond to the wealth of the super-rich; it also corresponds to retirement funds, so one precondition to getting rid of the government debt is to eliminate those funds at implement a radically different retirement system, etc.

Sorry for the long paragraph that follows, looks like the forum editor is broken...

If the US government was a family making $100k a year:


1. It would have $402k in unsecured debt (credit cards, not auto loans or mortgages)

You misunderstand the way the monetary system works. If you, as a private person, owe money on a credit card, there is the possibility that you will be unable to fulfil your contractual obligation, which is to send money to your credit card provider.

The only contractual obligation that the US government has towards holders of treasury bills is that interest and principal will be paid out - and the US government will always be able to do that, because they're the ones who run the monetary system. To believe that the federal government could become insolvent or bankrupt is as absurd as believing that Blizzard may one day become unable to pay out World of Warcraft in-game gold.

You have to get away from looking at those financial ratios. Without context, they are meaningless numbers. They only become relevant in the context of what is happening in the real economy. For example, if the government, in an attempt to reduce its deficit, squeezes the private sector out of money, then naturally this will restrict aggregate demand, which will increase unemployment. Then suddenly reducing the deficit at the current time starts to look like a pretty dumb thing to do. (Of course one could perhaps argue that the size of the deficit is fine as it is, the problem lies in that too much of it flows directly into the hands of the super-rich where it doesn't have a positive effect on jobs - but this just underscores the fact that simply looking at those aggregate numbers without context is entirely meaningless.)

So basically what you are saying is: the $14 trillion debt really isn't a problem.

Debt is debt. I understand our economic system functions by having debt. But when debt become too much debt for a nation to have?

So basically what you are saying is: the $14 trillion debt really isn't a problem.

Debt is debt. I understand our economic system functions by having debt. But when debt become too much debt for a nation to have?

There are a lot of different viewpoints on how much debt is too much for a country. But there's not a ton of support for most of them. For people talking about how the current US debt is an unacceptably high percentage of our GDP and we're approaching catastrophe not only if we don't decrease it but even if we just stop increasing it, there's Japan, which has had debt at something like 200% of GDP for a long time. Not that we'd want Japan's deflationary stagnation, but it's anything but a catastrophe.

While there are valid concerns about national debt levels, especially during a period of anemic growth following a massive recession, most of the people who are preaching doom and gloom because of it in the short and medium terms are using it as a cover to get to policies they favor anyhow, even if they're only tenuously connected to the debt issue. It's mostly about ideology right now, not economics.