Celebrates with 1 million people protesting against the budget cuts for education system. Not quite the achievement.
The US should pay attention, it’s on the same path right now. If they don’t get the spending under control, it will end in pain.
The bill eventually comes due.
It’s not sustainable at all.
It would be nice to see either party advance in any way towards those commitments. Whenever either party has the opportunity (i.e. control of Congress and the Executive) to do anything they invariably either cut taxes (GOP) or increase spending (Democrats) or both.
Fiscally only a divided government moves closer to fiscal sensibility.
No, it does not. The (e.g.) UK has, over its history, been in far "worse" financial shape than the US is or ever was. The UK was over 150% debt-to-GDP multiple occasions, as well as over 200%, and at one point (post-WW2) almost 250%:
* https://en.wikipedia.org/wiki/File:UK_debt_as_GDP_percent.pn...
* https://en.wikipedia.org/wiki/United_Kingdom_national_debt#M...
There were times when just interest was 10% of GDP:
* https://en.wikipedia.org/wiki/File:UK_National_Debt_interest...
The UK has bonds dating back to South Sea Bubble crisis of 1720, the Napoleonic and Crimean wars, the Irish potato famine, and World War 1:
* https://www.theguardian.com/business/2014/oct/31/uk-first-wo...
And yet they've managed to survive and be a pretty decent place to live. Most of the economic troubles they've gone through were either global in scale (Great Depression, GFC) or self-inflicted (Gold Standard post-WW1 (too high a peg), Thatcherism, Brexit), that had little/nothing to do with debt.
One does have to be mindful that debt servicing costs don't crowd out more important spending (education, health), but to think there's some magic number that causes issues has not been born out by the historical record; see Reinhart and Rogoff retraction:
* https://archive.ph/PtwWF / https://www.newyorker.com/news/john-cassidy/the-reinhart-and...
For Argentina, they were paying with money printing and that's why they had out of control inflation. So far the US is doing the same, and that's why inflation spiked. I think this is the long-term plan to finance the US debt. We're not going back to that 1-2% inflation. Probably 3-5% is the new normal.
I agree with you that there's no magic number of debt to GDP where things just fall apart. But there is certainly a number where they do. We don't know it, and it will be different for each country. Japan is sitting at 263% right now and doing OK (not great, but OK.)
Obviously debt weighs on future growth. This happens at the household level and at the company level and at the state level. That's well established.
The US right now is spending more on interest than defense. And that will keep rising. I'm not saying it will cause the US to fall. But between eroding the dollar through inflation, and weaponzing it aginst other countries - I think it will lose its status as a reserve currency. Not overnight, but I do expect to live to see it happen.
Stop with the "printing money" non-sense: it is private banks where money is created, not central banks or governments.
* https://www.bankofengland.co.uk/quarterly-bulletin/2014/q1/m...
* https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1905625
And if you think inflation is bad, try deflation. If you think a fixed money supply is good:
* https://delong.typepad.com/sdj/2013/10/the-great-depression-...
* https://archive.ph/FWKcL / https://www.theatlantic.com/business/archive/2012/08/why-the...
* http://www.nber.org/chapters/c11482
* https://en.wikipedia.org/wiki/Great_Bullion_Famine
> I agree with you that there's no magic number of debt to GDP where things just fall apart. But there is certainly a number where they do.
"Certainly". Sure. The South Sea Bubble was in the 1720s, it is now 2024. Somehow the UK has managed to muddle through for three hundred years.
> We don't know it, and it will be different for each country. Japan is sitting at 263% right now and doing OK (not great, but OK.)
So the US debt can double to reach the current levels of Japan (or past levels of the UK) and nothing happen.
> The US right now is spending more on interest than defense.
And yet, as a percentage of GDP, it's not even as high as it was in the recent past:
* https://fred.stlouisfed.org/series/FYOIGDA188S
> And that will keep rising.
Unless it drops. Like it has in the past.
> I think it will lose its status as a reserve currency.
There is nothing to replace it with, so I find this doubtful.
There isn't always a path forward that leaves everyone happy.
What they’re not saying here is that tax revenue is dropping and will wipe out any of these gains and that installed industrial activity dropped by over 30% since he assumed office.