Most modern states operate on debts and run deficits for decades, US isn't the only one.
But I wonder for how long this can be stretched? A century more? What's the future of the state as an institution?
But I wonder for how long this can be stretched? A century more? What's the future of the state as an institution?
All of the money that would’ve been going towards the military, the schools, the electric grid, the roads, job training & placement for unemployed people, food stamps (snap), social security, medicare, agriculture storage, and the various 3-letter departments must go to interest on the debt first and none of the money is left over to go to programs for The People anymore.
What would you do as a congressman if for every $4.5 Trillion you brought in from taxes, you saw $6.2 trillion being spent and were left with a $1.7 Trillion budget deficit?
$870 Billion of the money spent (14%) is the interest growing on the total government debt which is at 34 Trillion now. These are all the real numbers. What would you do as a congressman whom has the power to make changes and balance the budget?
A budget deficit means that the government has chosen not to print enough money to offset its spending. Now, the government printing its way to liquidity does have consequences, but fundamentally balancing the US federal budget is not like balancing a house budget.
And because the government can print the money at any time, it really doesn't matter how fast the interest is growing. What matters is whether people keep showing up to give the government the money.
Either way the US will be fine barring something stupid maneuver like embracing modern monetary theory.
The UK not too long ago refinanced debt dating back to the South Sea Bubble (1700s), the Napoleonic wars (1800s), World War One (early 1900s):
* https://www.theguardian.com/business/2014/oct/31/uk-first-wo...
The UK's debt-to-GDP has on multiple occasions gone over 150%, and on one occasion (WW2) almost reached 250%:
* https://en.wikipedia.org/wiki/United_Kingdom_national_debt#M...
Most of the issues that the UK has faced have generally been non-monetary (foreign enemies) or self-inflicted (Brexit).
Don't know off-hand when the UK last ran surpluses and could actually pay down debt principle.
Not saying this is a great way to do things, just that we are nowhere near the worst off.
It can, however, crowd out private investment and redirect the country’s resources via fiscal policy. It’s been happening for many decades and there’s really no scientific or pragmatic reason to suggest it’s somehow a fundamentally different system than it was 30-40 years ago when people were, wrongly, predicting it’s imminent demise.
If you think “it’s different this time” the burden is on you to prove why.
If we ignore the obvious political aspect, then the field is entirely based on trend prediction. Trend predication is not science. It's observation.
You can't have science without testable, falsifiable hypotheses. I recognize that the nature of macroeconomics makes testing hypotheses comparatively difficult. But it's not impossible, and anyone who says it is, is likely an economist.
Imagine what the world would look like if physicists got together and told the rest of the world that testing hypotheses isn't possible/feasible. That's where we've been at with economics for it's entire existence as a "science".
No one knows because it depends on a lot of variables that cannot be predicted in advance. The only major short term threat is that we default due purely debt ceiling debates / brinkmanship, not because of the burden of the debt itself.
The debt becomes a very real problem if hegemony of the US dollar as a reserve currency is ever disrupted. I don’t see that happening anytime soon, though.
> What's the future of the state as an institution?
Very high tax rates, unfortunately. Although there’s worse outcomes (currency destruction). These are the possible long term consequences.
Level up your macroeconomics before you catastrophize over the prospect of currency devaluation.
Once the USD stops being the primary reserve currency, then inflation will skyrocket and things become truly painful. The U.S. will feel the pinch like other nations whose economies have collapsed as a result of runaway spending.
Unfortunately, slowing GDP growth associated with a developed economy has pushed us into the red more often and for longer.
If and when the US approaches a position where it cannot pay the interest owed, you'd expect that to coincide with a reluctance by the lenders to continue lending.
So, you could argue that the US is not defying any odds, but rather it is consistently performing at or near the odds that have been predicted by the global public.
You can maintain massive credit card debt for a long, long, long time.
Sure you'll give a lot of your wealth to creditors, but you can do it.
US defaulting on its debt is likely going to be a far bigger problem than climate change or a small war. It also sets entire humanity back by decades.
I wonder how much you think the US defaulting on its debt would cost the world. It would be fairly disastrous, yes, but as a Forbes headline said a few weeks ago: "Climate Change Will Cost Global Economy $38 Trillion Every Year Within 25 Years, Scientists Warn."
https://www.imf.org/external/np/seminars/eng/2011/res2/pdf/c...
tl;dr: at some point, they will soft default. This means they stop paying high interest rates, inflation will run hot for a while, the debt will devalue, and with freshly reduced debt/GDP they they will spike interest rates to end inflation.