Why Doesn't the US Just Default?

[Saiwania]

The US shouldn't default on its national debt unless there is no choice but to. The US can (on paper anyways) still service its debt, even if it is massive and needs to be brought under control. It seems the Bush tax cuts were a huge mistake.

[The Pink Diamond]

The US shouldn't default on its national debt unless there is no choice but to. The US can (on paper anyways) still service its debt, even if it is massive and needs to be brought under control. It seems the Bush tax cuts were a huge mistake.

The Reagan tax cuts were a huge mistake. But they could at least be called an experiment: an experiment to discover where US taxation was on the Laffer Curve.

Knowing the result of that experiment (that the lowering of taxes on the rich did not produce greater tax revenue for the US government), the Bush tax cuts don't have the excuse of being a mistake.

The Bush tax cuts were fraud.

Exploiting the populist misconception that the Reagan tax cuts were responsible for the good times in Reagan's second term. There were many causes, like the collapse of world oil price (a major import cost of the US then), the containment of 70's inflation by the Fed (under a chairman appointed by Carter and reappointed by Reagan) and the emergence of a new industry (IT) at that time centered in the US. AND the stimulus spending! Most US military spending goes to individuals and corporations within the US. Military spending is stimulus spending.

George Bush's term did not deliver any such economic benefits. Same tax cut rationale, none of the other windfalls. He threw in a whole lot of stimulus spending too: when the US invaded Iraq there was a ton of stimulus spending, to active service military personnel (who mainly spend or invest back in the US) but also to military procurement (US corporations). It was off-budget, wasn't counted as annual US government spending until Obama put it back on the books.

Even with that significant stimulus spending, the economy didn't do so well under George Bush. It did much better under Clinton whose policy was higher taxes (and with a Republican Congress for the later part of his term, spending restraint).

And whether an honest mistake or fraud by George Bush, let's not fall for the same trick a third time. Cutting taxes again won't do anything good.

Your guy? Donald Trump? I'd never vote for him. If the Democrats ran Charles Manson as their guy, I still wouldn't vote for Trump as the lesser of two evils. He's not getting my vote under any circumstances but I would respect him more if he'd finally renounce that stupid campaign strategy of promising tax cuts without spending cuts. Twice failed in practice (16 years of presidency) and with the glowing counter-example of the Clinton presidency, it's time for a Republican to finally get serious about cutting the deficit.

No more cheap promises. No more tax cuts. Grow a pair and tell us exactly what you do want to tax. And if you're serious about "small government" then tell us the big cuts to spending you'd make to balance the budget.

[Sociopia]

And how exactly would the elites and those dependent on the state benefit from this at all?

[The Pink Diamond]

And how exactly would the elites and those dependent on the state benefit from this at all?

Don't pussy-foot around "just asking questions".

Tell us your theory about how plutocrats and welfare moms are colluding to corrupt democratic elections.

It's silly, so I'll cut you some slack. Maybe you were joking.

Make it a good joke now. Tell us your theory!

[Ashmoria]

I don't understand why the United States keeps borrowing money. We constantly spend more than we take in and never pay back what we owe and go further and further into debt. If we keep borrowing we will end up like Greece and default.

If the the company I work for ran its finances like the government we would be bankrupt very quickly. Many people also have to choose between paying rent and eating. No one should have to make that choice yet the government borrows money like it grows on trees.

If the government can just borrow money and never have to pay it back why bother having income tax? Or why not just print all the money we need?

Also US Treasury debt is viewed as a risk free asset and no one ever believed the United States wouldn't pay its debts and the world financial infrastructure is based around it. This is stupid. No investment should be risk free. The rest of the world uses the United States as a piggy bank because there is no risk involved. Why would having risk involved in treasury bonds be a bad thing?

The United States should stop spending so much money and not raise the debt ceiling the next time it comes up and start cutting things we don't need like ridiculous defense budgets and useless scientific research and other things. If it were up to me I would default on the debt not pay our interests payments and start running the country with tax revenue alone and introduce risk into Treasury Bonds. The global economy and financial system wouldn't be so intertwined anymore and we would go back to simpler time. Plus if the US defaulted it would likely wallop financial markets worldwide and trigger other sovereign debt defaults and end the world's addiction to debt.

Your thoughts NSG?

we don't need that kind of trouble. we are just getting out of the hole we fell into in '08. why would we want to fall into a bigger one?

[San Lumen]

It would crash the world economy causing world war 3 and the end of the world.

How would it cause world war 3 and the end of the world?

[Hydesland]

I don't understand why the United States keeps borrowing money.

Because immediately going to surplus would inflict major damage to the economy.

If the the company I work for ran its finances like the government we would be bankrupt very quickly.

You cannot compare governments to companies. When a government reduces its spending, it also reduces its income - when a company reduces its spending, it does not necessarily mean its income will reduce. A company cannot print its own currency, a government can. A company is expected to have a limited lifetime, a country's lifetime in contrast is expected to range from very long to practically unlimited.

If the government can just borrow money and never have to pay it back why bother having income tax? Or why not just print all the money we need?

The government DOES pay back debt, every month, by amortization, but it still has to service the interest too. This means the government cannot practically borrow money forever unless it wants to give up control of its monetary policy.

Also US Treasury debt is viewed as a risk free asset and no one ever believed the United States wouldn't pay its debts and the world financial infrastructure is based around it. This is stupid. No investment should be risk free. The rest of the world uses the United States as a piggy bank because there is no risk involved.

This is one of the biggest reasons the US SHOULDN'T default, one man's debt is another man's savings. This is especially true for the US government, if the US government defaulted, a huge amount of savings and capital would go up in smoke.

[Valaran]

I was considering whether I should post a refutation, and then was like "nah; Hydesland's got this one covered"

[Annorax]

The OP of this thread is a person who gets "it". Americans pay income tax on their Monopoly money to pay back more Monopoly money. Taxes are supposed to go to services for the public but in reality its just tribute.

[Ashmoria]

The OP of this thread is a person who gets "it". Americans pay income tax on their Monopoly money to pay back more Monopoly money. Taxes are supposed to go to services for the public but in reality its just tribute.

tribute?

we take in less in tax than we pay out. who/what is it a tribute to?

[Annorax]

The OP of this thread is a person who gets "it". Americans pay income tax on their Monopoly money to pay back more Monopoly money. Taxes are supposed to go to services for the public but in reality its just tribute.

tribute?

we take in less in tax than we pay out. who/what is it a tribute to?

Well think about it what do you get, or more precisely what do I get for my income tax that is paid out? I'm not on SS, hell I may not even get it when I do get to retire. I have student loans sure, I got a loan to go to school, most people need it but it still must be paid back. About all I can see that I get is national defense.

[Kainesia]

who cares about your company? the government is not a company. it is not a household either. stop comparing it to them.

it would really really really piss everyone off btw

so what? Why should we keep borrowing and going further and further into debt?

Because you are nowhere near crisis levels. U.S debt is just above 100% of GDP, not that unusual in the grand scheme of things. Japan's debt is 230% its GDP and no one is talking about the world's third largest economy crashing anytime soon.

Government debt is not like private sector debt, and let's not forget that all the U.S has to do to eliminate the debt problem is to make a budget surplus, which is difficult politically, but not practically.

And furthermore, let's not forget that debt works both ways, the U.S is owed a lot of international debt as well.

The only time debt becomes a problem for the U.S government is when it approaches the debt ceiling, and the problem is not that the government struggles to find the money to finance itself, but that congress has to agree to allow it to finance itself. The problem is political, not economical.

Overall the U.S national debt isn't much to worry about right now. Running a budget surplus is cool but not necessarily a necessity. The U.S is nowhere near defaulting on its debts, and even if somehow that became a prospect, you can rely on the rest of the world to back you up, seeing as how the world economy would face disaster if the U.S government couldn't pay its bills.

[Kainesia]

tribute?

we take in less in tax than we pay out. who/what is it a tribute to?

Well think about it what do you get, or more precisely what do I get for my income tax that is paid out? I'm not on SS, hell I may not even get it when I do get to retire. I have student loans sure, I got a loan to go to school, most people need it but it still must be paid back. About all I can see that I get is national defense.

The U.S government is the world's largest employer. It pays its employees who then spend that money on consumer goods in the private sector. So even if your business is totally independent of government, you are actually relying on them for a good chunk of your income, because many of your customers will get their income from the government, and those customers who themselves are private sector workers will be serving government employees somewhere along the line. The flow of income that reaches you in the private sector will have government involved somewhere. That's why reducing a deficit is so difficult. Cutting spending means cutting jobs, and it doesn't matter whether its democrat or republican in charge, lower employment and a shrinking economy looks bad for any party, even if it means balancing the books.

[San Lumen]

The OP of this thread is a person who gets "it". Americans pay income tax on their Monopoly money to pay back more Monopoly money. Taxes are supposed to go to services for the public but in reality its just tribute.

I;m glad someone agrees with me.

[Kainesia]

The OP of this thread is a person who gets "it". Americans pay income tax on their Monopoly money to pay back more Monopoly money. Taxes are supposed to go to services for the public but in reality its just tribute.

I;m glad someone agrees with me.

You may get "it". But "it" clearly isn't economics.

[San Lumen]

I;m glad someone agrees with me.

You may get "it". But "it" clearly isn't economics.

What do you mean?

[Annorax]

I;m glad someone agrees with me.

You may get "it". But "it" clearly isn't economics.

If the U.S. defaults so what? Boowhoo The horror that China or Japan wouldn't get their dough. What will they do about it? Historically that starts wars but no one with half a brain cell would invade the U.S.

[San Lumen]

You may get "it". But "it" clearly isn't economics.

If the U.S. defaults so what? Boowhoo The horror that China or Japan wouldn't get their dough. What will they do about it? Historically that starts wars but no one with half a brain cell would invade the U.S.

I'm glad to see someone in this thread agrees with me.

[New Romania I]

If the government can just borrow money and never have to pay it back why bother having income tax? Or why not just print all the money we need?

Excuse me... really? We need PEOPLE to work in these factories and those people need MONEY so they can WORK. To print more money we'd need a shit ton of workers. First off: we need people to get the materials, second off: we need to pay repair costs for machines, third off: we need a maintenance team, security and printer workers, fourth off: we need a shit ton of printers, fifth off: we need to process the materials, have machines for the careful production and serial numbers, make sure its the correct size, check legitimacy... ETC.
So how can we just randomly PRINT EVERYTHING WE NEED? We CAN, in theory. But look, we need money to pay for all of these things.

[Sociopia]

And how exactly would the elites and those dependent on the state benefit from this at all?

Don't pussy-foot around "just asking questions".

I'm not 'pussy-footing'. It wouldn't be beneficial to those who matter so why would they want it to occur?

Tell us your theory about how plutocrats and welfare moms are colluding to corrupt democratic elections.

It's silly, so I'll cut you some slack. Maybe you were joking.

Make it a good joke now. Tell us your theory!

Okay, so I have this crazy theory that people only do stuff if they want to, which is usually dictated by whether or not it would benefit them. Hilarious right?

[Ethel mermania]

I don't understand why the United States keeps borrowing money. We constantly spend more than we take in and never pay back what we owe and go further and further into debt. If we keep borrowing we will end up like Greece and default.

If the the company I work for ran its finances like the government we would be bankrupt very quickly. Many people also have to choose between paying rent and eating. No one should have to make that choice yet the government borrows money like it grows on trees.

If the government can just borrow money and never have to pay it back why bother having income tax? Or why not just print all the money we need?

Also US Treasury debt is viewed as a risk free asset and no one ever believed the United States wouldn't pay its debts and the world financial infrastructure is based around it. This is stupid. No investment should be risk free. The rest of the world uses the United States as a piggy bank because there is no risk involved. Why would having risk involved in treasury bonds be a bad thing?

The United States should stop spending so much money and not raise the debt ceiling the next time it comes up and start cutting things we don't need like ridiculous defense budgets and useless scientific research and other things. If it were up to me I would default on the debt not pay our interests payments and start running the country with tax revenue alone and introduce risk into Treasury Bonds. The global economy and financial system wouldn't be so intertwined anymore and we would go back to simpler time. Plus if the US defaulted it would likely wallop financial markets worldwide and trigger other sovereign debt defaults and end the world's addiction to debt.

Your thoughts NSG?

You show the same amount of economic knowledge on this topic as you do on rental construction. I would suggest getting an education before making more Posts on these topics.

[The Greater Ohio Valley]

The OP of this thread is a person who gets "it". Americans pay income tax on their Monopoly money to pay back more Monopoly money. Taxes are supposed to go to services for the public but in reality its just tribute.

I;m glad someone agrees with me.

So you're not looking for a debate or discussion, just for people who agree with you?

[San Lumen]

I;m glad someone agrees with me.

So you're not looking for a debate or discussion, just for people who agree with you?

I did not say that at all.

[Ashmoria]

tribute?

we take in less in tax than we pay out. who/what is it a tribute to?

Well think about it what do you get, or more precisely what do I get for my income tax that is paid out? I'm not on SS, hell I may not even get it when I do get to retire. I have student loans sure, I got a loan to go to school, most people need it but it still must be paid back. About all I can see that I get is national defense.

your not knowing what the government does for you is not the same as telling me about this tribute thing .

[Quokkastan]

You may get "it". But "it" clearly isn't economics.

If the U.S. defaults so what? Boowhoo The horror that China or Japan wouldn't get their dough. What will they do about it? Historically that starts wars but no one with half a brain cell would invade the U.S.

Most of the national debt is held by US banks. All of those banks would collapse. The banking system would collapse. Most people's savings would disappear.