Why Doesn't the US Just Default?

[Angleter]

1. It doesn't need to default.

2. If it did default, it'd (at best) cost considerably more for the US government to borrow.

[Arkolon]

That's not desirable, though.

My point is that if the painful steps taken to balance the budget and clear off the debt are not taken right now when it is least painful, when the time comes and the US needs to default, it will be even more painful to default and restart from zero all over again.

But sovereign debt isn't necessarily bad, why would you want to get rid of it?

[SaintB]

The US should reign in expenditure by cutting down on environment, welfare, agriculture subsidies and all other spending, and reduce their defence expenditure to balance the books first

Cutting welfare subsidies creates more poverty and homelessness and actually costs local and state governments more which would only increase debt as states look to the fed for help covering the costs.

Cutting agricultural subsidies makes growing crops with a small profit margin for farmers (i.e. almost anything but wheat, corn, and soybeans) untenable for family farmers. Many small time farming operations would either have to give in, switch to cash crops, or produce high yield high profit crops like the ones mentioned before. That would have the effects of driving food prices way up for consumers, profits way down for farmers, and the closings of hundreds of farms which would result in the loss of tens of thousands of jobs. A lot of Ag Subsidies also go toward helping farmers use sustainable farming methods so that they can reuse their land for crops year after year and reduce pollution such as the runoff of soil, nitrates, and phosphorous into rivers and lakes (pro-tip soil, phosphorus, and nitrogen cause massive algae blooms that steal the oxygen from the water and cause huge declines in fish population, the chemicals also make water UNDRINKABLE).

And finally: We sit on the doorstep of the largest environmental disaster since an asteroid struck the earth and rushed us into an early ice age that annihilated the dinosaurs and you think its a good idea to cut environmental funding?

[Freefall11111]

Not.

Objectively wrong. This isn't even a discussion. US debt is created through bonds. Bonds are paid back constantly. Have you never bought a bond? Have you never known anyone who bought a bond?

[Minoa]

No-one would dare lend to the US if they ever defaulted, and the US would end up risking its intricate relationship between the Federal government and State governments, as well as its citizens.

There is no doubt that many people are so angry at the US government, which has lead to the rise of alternative news from radical points of view, like Alex Jones.

[Stucco Houses]

Because national debt is among the bases of the economy and is constantly being payed and taken on. The "Debt Crisis" is a lie brought on by people who want to spend less on people's interests so that they can repay the wealthy benefactors who got them elected in tax cuts.

[SaintB]

Not.

Objectively wrong. This isn't even a discussion. US debt is created through bonds. Bonds are paid back constantly. Have you never bought a bond? Have you never known anyone who bought a bond?

I personally own thousands in federal bonds. I get 30% of my income tax returns in savings bonds...

[FutureAmerica]

The US prints its own reserve currency. It can't lose.

[Chestaan]

My point is that if the painful steps taken to balance the budget and clear off the debt are not taken right now when it is least painful, when the time comes and the US needs to default, it will be even more painful to default and restart from zero all over again.

But sovereign debt isn't necessarily bad, why would you want to get rid of it?

This. People really need to start understanding this point.

[Arkolon]

But sovereign debt isn't necessarily bad, why would you want to get rid of it?

This. People really need to start understanding this point.

Well, we should still politely specify that it only doesn't matter as long as you're the US, Japan, the UK, or Germany before the euro. Otherwise you probably shouldn't go too overboard with deficit spending.

[Indira]

1: The US is NOT a company. The two aren't even comparable.

2: US debt works because of the way it's set up. It's reliably paid back over time, making it something reliable, not a liability.

3: You ever defaulted on payment of a loan? Probably not, but I'm willing to bet it rips your credit rating a new one. Make that happen to the US and...the results are not pretty. (Actually, I suspect that it would probably cause the US to cease existence as a world power) Perhaps it's a good thing you don't run the US

[Greed and Death]

Why does the Us not default ? Because only the banks are allowed to wreck the world's economy for fun and profit.

[Katganistan]

"Hi, just letting you know we never will pay back the money you lent us. Nope, not ever. Nope, not even the interest. Nope, we won't borrow from It'sNiceestan to give you back some, sorry, no."

Never mind that money is made on the interest of those loans for other nations, and we make money on our loans to other nations.

World economy takes a hit, another worldwide recession

Other countries not so eager to make treaties with us

No more borrowing, ever.

Yeah, defaulting is just an awesome idea.

[New Eirangard]

The default of the United States would help bring a massive economic depression that would be much worse than seen in the 30's.
And thats why we dont do it

[New Eirangard]

"Hi, just letting you know we never will pay back the money you lent us. Nope, not ever. Nope, not even the interest. Nope, we won't borrow from It'sNiceestan to give you back some, sorry, no."

Never mind that money is made on the interest of those loans for other nations, and we make money on our loans to other nations.

World economy takes a hit, another worldwide recession

Other countries not so eager to make treaties with us

No more borrowing, ever.

Yeah, defaulting is just an awesome idea.

This basically.

[Greed and Death]

"Hi, just letting you know we never will pay back the money you lent us. Nope, not ever. Nope, not even the interest. Nope, we won't borrow from It'sNiceestan to give you back some, sorry, no."

Never mind that money is made on the interest of those loans for other nations, and we make money on our loans to other nations.

World economy takes a hit, another worldwide recession

Other countries not so eager to make treaties with us

No more borrowing, ever.

Yeah, defaulting is just an awesome idea.

The loans actually tend to make money for the US as other nations use the dollar as reserve currency and hold bonds rather than cash this pushes the interest rates lower and often pushes them to zero or negative once inflation is taken into account.

[The Intergalactic Universe Corporation]

Still, this may not last, and thus, it would be wise for the US to start cutting expenditure now before the situation turns bad and start a policy of passing balanced budgets

[Chestaan]

This. People really need to start understanding this point.

Well, we should still politely specify that it only doesn't matter as long as you're the US, Japan, the UK, or Germany before the euro. Otherwise you probably shouldn't go too overboard with deficit spending.

Oh definitely. I think we need to think as debts/deficits as something similar to salt. In reasonable amounts its a very positive thing, but in large amounts it can cause massive damage.

[The Intergalactic Universe Corporation]

Well, we should still politely specify that it only doesn't matter as long as you're the US, Japan, the UK, or Germany before the euro. Otherwise you probably shouldn't go too overboard with deficit spending.

Oh definitely. I think we need to think as debts/deficits as something similar to salt. In reasonable amounts its a very positive thing, but in large amounts it can cause massive damage.

Agreed.

[Freefall11111]

Well, we should still politely specify that it only doesn't matter as long as you're the US, Japan, the UK, or Germany before the euro. Otherwise you probably shouldn't go too overboard with deficit spending.

Oh definitely. I think we need to think as debts/deficits as something similar to salt. In reasonable amounts its a very positive thing, but in large amounts it can cause massive damage.

It's not the amount that matters. It's the bond yields.

[Arkolon]

Oh definitely. I think we need to think as debts/deficits as something similar to salt. In reasonable amounts its a very positive thing, but in large amounts it can cause massive damage.

It's not the amount that matters. It's the bond yields.

Well, the servicing matters. You can be trillions in debt but if you can service it, it's not a problem. And you can pull a Japan and have the central bank print money to buy most of it up and ~*~pretend~*~ that you're one day going to pay it back.

[Freefall11111]

It's not the amount that matters. It's the bond yields.

Well, the servicing matters. You can be trillions in debt but if you can service it, it's not a problem. And you can pull a Japan and have the central bank print money to buy most of it up and ~*~pretend~*~ that you're one day going to pay it back.

If it works, is it really pretending?