In the recent debt ceiling coverage by the mass media, there were lots of technical discussions on how to raise the debt ceiling, but they seemed to be missing the crucial part of whether the US even needs low debt and a balanced budget. What is the debt level/GDP that is optimal? Can/should it be increased given unique position of US in the global economic system? What is the current state of the issue among economists and researchers?
Balance, yes. There's a limit to how much debt we can incur before lenders decide that it's too risky to lend money to the US. There's also the fact that as the US borrows money the overall cost of credit for everyone else goes up. So, let's balance the budget and cool down the borrowing.<p>Payoff the debt, no. Paying the debt would have a negative impact on the overall economy. Money that would normally go to improve the economy would be used to pay down the debt. Money is what powers the economy so we don't want the negative balance that paying off the debt would have on the economy. Also, money that would go to payoff the debt would have to be taken directly from government services, greatly impacting people. The US has paid off the debt once(?) during Andrew Jackson's presidency, which didn't last long, but doing so brought on a nasty recession that almost immediately caused the government to go back into debt. We would see the same happen again.
Just look at the stats of the countries of the world. Imagine if aliens came down tomorrow and erected huge, impenetrable walls along all of the borders of the world. The problem the US would have is what to do with all of the stuff it usually exports. It produces enough corn to feed well over 2 billion people per year. It’s also the top producer of soy and lots of other stuff. It also has rare earth minerals - left untouched due to economic reasons. And leaving those resources untapped means eventually employing them will benefit from the latest, safest, cleanest tech. It basically has it all, including oil.<p>The US just had an awesome jobs report. The last several economic indicators were strong and stronger than much of the world. Does it have problems? Sure. As Churchill said (awful paraphrase)“can always count on the US to do the right thing after they try all the wrong ones.”<p>Any serious talk of US debt needs to delve deep into the world of international trade and current accounts. It actually sort of reminds me of the worst parts of writing firewall rules…
Those are two interdependent things.<p>To reduce the debt, you not only have to balance the budget, you have to go further and put the budget into surplus.<p>Only two ways to go into surplus: reduce the expenditure or increase the incomings (taxes).<p>Debt is the killer. Even a piddling 1% increase in the interest rate means that the Government has to find another 320 BILLION DOLLARS EVERY YEAR to service that debt.<p>Let's face it. 32 Trillion (and still rising) debt is impossible to come back from. The US has nowhere to go but to eventual collapse, whether this year or next year is immaterial. It's all over, red rover.