So…irrespective of whether you think we should have less debt, the debt limit is a pointless exercise. If congress wants the government to spend less money, congress should decrease the budget and remove laws that require spending. The debt limit just forces the executive branch to choose which way it would prefer to disobey congress.
> While a household has a finite lifespan, a government has an indefinite planning horizon. So, while a household must eventually retire its debt, a government can, in principle, refinance (or roll over) its debt indefinitely.
https://www.stlouisfed.org/publications/regional-economist/f...
No it doesn't. The whole world runs on debt, it's not a terribly big deal.
What's hilarious is that all these arguments have been made repeatedly, in the same form, and by members of both parties, for far longer than 30 years. And it's been wrong, repeatedly, every time. All the shrieking about the unsustainable Regan spending in the 80's? Meaningless. That's been paid off for decades now.
Typically mortgage payments include interest and principal, so that each payment reduces the total amount owed. Treasury bill, note and bond coupons are interest only, so at maturity the entire principal is due. Treasury debt is not incrementally paid off with each payment.
It's more the other way around. Government appears to spends more than it gets because people further down the spending chain don't spend everything they get.
In other words to allow people to save what they want, government has to dis-save more than it would prefer.
If we banned financial saving, the problem would go away no matter how much government spent.
The grandkids are fine. The 'bill', such that it is, will be paid automatically when the grandkids spend their inheritance from granddad. That's what a Treasury Bond, a Gilt or a JGB is - a savings asset.
As ever it pays to look at both sides of the balance sheet. For every liability there is an asset. It all has to sum to zero.
If you want to limit spending, you have to do it at appropriations time, which is when Congress decides what to spend money on. That’s when you can sanely have the “should we spend all the money we don’t have” argument.
Do note that Reagan spent money “we didn’t have” like it was going out of style. Bill Clinton, on the other hand, left office with a surplus, promptly squandered by George W. Bush, whose hole we are still digging out of. Trump made this a lot worse, of course, because that’s all he’s capable of doing with any situation.
Yet, you say:
> Do note that Reagan spent money “we didn’t have” like it was going out of style.
No blaming of the Democrats in control of the House?
> Bill Clinton, on the other hand, left office with a surplus
So the Republican congress under the majority of Clinton's tenure had nothing to do with the spending?
> promptly squandered by George W. Bush
Yeah, that had nothing to do with 9/11, the dot com bust, or the Democratic congress which contributed to at least third of the debt under Bush even though they represent a quarter of Bush's term.
Also, the grand strategy is called capitalism and Keynesian economics. See, you borrow some money to invest in future economic growth. And then you keep doing that and keep growing.
What happens if we build a ton of wealth, through labor, but the amount of money in circulation and saved in bank accounts doesn't increase to account for all that extra economic activity? It would cause a dollar to be worth more and more, shifting the value of a dollar.
Similarly, what happens if the government makes purchases by printing more dollars? It has the potential to make a dollar worth less, if the purchasing gets out in front of the productive capacity.
When the US government issues debt to spend money, it's doing the equivalent of printing more dollars, just a special type of dollars. When the debt is due, the government can always print more dollars. Always. There's no fixed amount of dollars, there are only the number of dollars that the US government decides that there are in circulation.
So US treasuries act just like more money supply; they are traded for dollars, saved in accounts like dollars, pass between holders just like dollars. The only thing about this debt is that by changing interest rates, the the government changes the value of currently held treasuries. When somebody has a $10k in treasury notes that yield 2%, and the fed increase interest rates to 3%, it decreases the $10k in treasuries to a smaller value. So this sort of debit instead of dollars isn't completely useless, it's gives a bit of control of the money supply in a weird way.
And since the US dollar is the international reserve currency, the preferred way to save money, these treasury notes end up not only being the methods of savings in the US, they are the methods of savings for the entire world. This gives the US enormous power the word over, gives US business enormous power, and is a massive advantage for the US.
But in addition to giving the US power across the world, by being the reserve currency, we also need to be sure that there are enough dollars out there for people to hold onto in order to represent their savings. And in reality, that means there needs to be enough treasury notes, "debt", for the everyone to hold onto and trade. Because one thing that kills a currency is not enough of it to go around, which makes it too illiquid. Which means that the US needs to do enough spending to make sure that there's enough t-notes out there.
In essence, our "debt" is actually skimming off the productivity of the rest of the world. We take their stuff, they get our dollars that we issued out of thin air, and all members of the US economy benefit.
It's incredibly important to realize that the US is not a household, not a business, the US is the currency issuer. We should not be concerned about the level of "debt" other than we are 1) concerned about the total money supply of dollars, 2) want to prevent inflation from too much spending.
It's people saving money that causes the 'problem' in the first place. If they didn't save there wouldn't be a deficit.
Deficit = excess saving as a matter of accounting identity.
We have an 'unbalanced' budget precisely to allow people to save what they want.