When you can print your own money, our debt is not like a mortgage.
Instead our debt is part of the engine that drives the global financial system.
As long as our GDP grows faster than our debt, all is well.
Here's a little interest rate example of how you can grow down the debt.
Let's assume that the GDP grows at an aggressive 3% a year and an inflation rate of 2%. As long as our debt grows at less the 3%, debt as a percentage of the GDP goes down.
When that has happened in the past (Obama administration), interest rates fell below the rate of inflation. Which meant that investors were in fact paying the US to hold their money securely for 10 years.
Keynes basically said during tough times, the government should spend money to support the economy. During good times, the government should reduce spending and raise taxes in order to drive down the debt-to-GDP ratio and give us some flexibility during the next recession.
Unfortunately Republican presidents inevitably REDUCE taxes during boom times which only makes the next downturn that much more difficult.
It is the fact that the government generates money (printed or otherwise) that renders the economy unstable. If growth were the key to reducing the debt, we wouldn't now have a situation where the debt far outstrips GDP. You note correctly that the prime responsibility lies with Republican administrations, but under Obama the debt, for a variety of reasons, nearly doubled, an average rate of 12% annually. One of Trump's rare achievements is that he managed to exceed the Obama rate of increase during his first administration and is set to do even more this time, thanks at least in part to the DOGE effort to control "fraud, waste, and abuse".
Dr. Keynes theory, as all economic ideals, depends on disciplined policy making and on following the concept completely. Even 'trickle down economics' works provided that the extra money that goes to the wealthy via tax breaks and subsidies is invested in productive activities. When it is used to propel a self-perpetuating cycle of investment in investments there is no trickling that takes place and the result is a superannuated industrial base, an undereducated plurality of the population and a disconnected upper class that far outstrips anything Thorstein Veblen conceived of.
In the situation you describe, all appears well as long as the stipulations hold, but whenever they break down as they are now, the potential for economic upset increases markedly because there is no stable foundation for the money being printed. Money has no value in and of itself, it is only worth what it will buy.
Just wanted to point out sovereign debt is not in and of itself a bad thing.
US debt in particular is essential to the our global financial system because the dollar is the default currency for international trade and most every other currency is valued based on its relationship to the dollar.
While it is important to be able to pay off personal debt, it would be dangerous for the US to try to pay off the portion of our debt held by the public.
Instead the measure of both the health and stability of our debt is that it remains a responsible percentage of our GDP during good times.
The fact that Trump seems determined to crash the global financial system remains a mystery to me.
I'm willing to stipulate that national or sovereign debt is not intrinsically bad, but it is intrinsically dangerous because of the potential for abuse and weaponization if held by an opponent such as the PRC. I'd also argue that sovereign/national wealth, properly managed, is substantially better than debt and a potentially much more powerful and stable driver of a scalar economic system. The challenge we have in this country is that the opportunity to establish a sovereign wealth fund was foregone when the land that was our major asset was deeded away for political advantage at a fraction of its potential value. Now we have the arguably absurd situation of the government going into debt to subsidize commercial research by private companies who then become owners of the results with no future restrictions on their profit taking and minimal tax liability.
Trump's behavior is similarly inexplicable to me as well. The only explanation that makes sense is that he really is senile and not in control of his behavior.
What you just said would be what a "fiscal conservative" would applaud. There is nothing "conservative" about the MAGA clowns in the House of Representatives. The Oligarchs have bought them their elections and now they will pay them back with OUR money. I call it fraud.
The only silver lining I see in this travesty is that it is such a transparent transfer of wealth from most Americans to the ridiculously already rich. This is the basis for "class warfare". Most of us against them. THIS is a "Let them eat cake" moment!
I believe the backlash from this will reverberate for decades and the "Republicans" will lose control for several cycles. Ya don't pay for bonuses to the rich with money from Medicaid and Medicare. It is more than cruel. It is political suicide.
As to elections being undermined, recent rulings in Michigan are an example of how the courts are holding sacred the states right to conduct Federal Elections. 2026 will be a figurative GOP bloodbath - self inflicted.
I agree Bill. I called it a Ponzi scheme on a post a couple of days ago; I'm not sure that was well received, but it seems pretty close. I've always been a fiscal conservative, both politically and in business and it's served me pretty well. I get a little crazy reading annual reports when the asset labeled Goodwill is greater than the stockholder's equity line and companies are borrowing money to pay dividends so they don't have to admit the level of mismanagement going on. It boggles the mind to think how strong the dollar and our economy would be if there was no federal debt and the budget was regularly balanced, but thinking that way makes it sound as though Missouri had legalized a lot more than weed.
Maybe people like you and me who had to do the heavy lifting of being fiscally accountable should reclaim the term "conservatives". After all, what just passed the House is RADICAL and financially irresponsible on steroids.
Reclaiming the idea of 'conservatives' and 'liberals' is one of the challenges we face in restoring a civil approach to our political system. The perversion of the language may turn out to be the worst legacy of the last couple of decades.
When you can print your own money, our debt is not like a mortgage.
Instead our debt is part of the engine that drives the global financial system.
As long as our GDP grows faster than our debt, all is well.
Here's a little interest rate example of how you can grow down the debt.
Let's assume that the GDP grows at an aggressive 3% a year and an inflation rate of 2%. As long as our debt grows at less the 3%, debt as a percentage of the GDP goes down.
When that has happened in the past (Obama administration), interest rates fell below the rate of inflation. Which meant that investors were in fact paying the US to hold their money securely for 10 years.
Keynes basically said during tough times, the government should spend money to support the economy. During good times, the government should reduce spending and raise taxes in order to drive down the debt-to-GDP ratio and give us some flexibility during the next recession.
Unfortunately Republican presidents inevitably REDUCE taxes during boom times which only makes the next downturn that much more difficult.
It is the fact that the government generates money (printed or otherwise) that renders the economy unstable. If growth were the key to reducing the debt, we wouldn't now have a situation where the debt far outstrips GDP. You note correctly that the prime responsibility lies with Republican administrations, but under Obama the debt, for a variety of reasons, nearly doubled, an average rate of 12% annually. One of Trump's rare achievements is that he managed to exceed the Obama rate of increase during his first administration and is set to do even more this time, thanks at least in part to the DOGE effort to control "fraud, waste, and abuse".
Dr. Keynes theory, as all economic ideals, depends on disciplined policy making and on following the concept completely. Even 'trickle down economics' works provided that the extra money that goes to the wealthy via tax breaks and subsidies is invested in productive activities. When it is used to propel a self-perpetuating cycle of investment in investments there is no trickling that takes place and the result is a superannuated industrial base, an undereducated plurality of the population and a disconnected upper class that far outstrips anything Thorstein Veblen conceived of.
In the situation you describe, all appears well as long as the stipulations hold, but whenever they break down as they are now, the potential for economic upset increases markedly because there is no stable foundation for the money being printed. Money has no value in and of itself, it is only worth what it will buy.
Agree with everything that you've said.
Just wanted to point out sovereign debt is not in and of itself a bad thing.
US debt in particular is essential to the our global financial system because the dollar is the default currency for international trade and most every other currency is valued based on its relationship to the dollar.
While it is important to be able to pay off personal debt, it would be dangerous for the US to try to pay off the portion of our debt held by the public.
Instead the measure of both the health and stability of our debt is that it remains a responsible percentage of our GDP during good times.
The fact that Trump seems determined to crash the global financial system remains a mystery to me.
I'm willing to stipulate that national or sovereign debt is not intrinsically bad, but it is intrinsically dangerous because of the potential for abuse and weaponization if held by an opponent such as the PRC. I'd also argue that sovereign/national wealth, properly managed, is substantially better than debt and a potentially much more powerful and stable driver of a scalar economic system. The challenge we have in this country is that the opportunity to establish a sovereign wealth fund was foregone when the land that was our major asset was deeded away for political advantage at a fraction of its potential value. Now we have the arguably absurd situation of the government going into debt to subsidize commercial research by private companies who then become owners of the results with no future restrictions on their profit taking and minimal tax liability.
Trump's behavior is similarly inexplicable to me as well. The only explanation that makes sense is that he really is senile and not in control of his behavior.
Dave,
What you just said would be what a "fiscal conservative" would applaud. There is nothing "conservative" about the MAGA clowns in the House of Representatives. The Oligarchs have bought them their elections and now they will pay them back with OUR money. I call it fraud.
The only silver lining I see in this travesty is that it is such a transparent transfer of wealth from most Americans to the ridiculously already rich. This is the basis for "class warfare". Most of us against them. THIS is a "Let them eat cake" moment!
I believe the backlash from this will reverberate for decades and the "Republicans" will lose control for several cycles. Ya don't pay for bonuses to the rich with money from Medicaid and Medicare. It is more than cruel. It is political suicide.
As to elections being undermined, recent rulings in Michigan are an example of how the courts are holding sacred the states right to conduct Federal Elections. 2026 will be a figurative GOP bloodbath - self inflicted.
86 47
86 MAGA
86 Oligarchs
I agree Bill. I called it a Ponzi scheme on a post a couple of days ago; I'm not sure that was well received, but it seems pretty close. I've always been a fiscal conservative, both politically and in business and it's served me pretty well. I get a little crazy reading annual reports when the asset labeled Goodwill is greater than the stockholder's equity line and companies are borrowing money to pay dividends so they don't have to admit the level of mismanagement going on. It boggles the mind to think how strong the dollar and our economy would be if there was no federal debt and the budget was regularly balanced, but thinking that way makes it sound as though Missouri had legalized a lot more than weed.
Maybe people like you and me who had to do the heavy lifting of being fiscally accountable should reclaim the term "conservatives". After all, what just passed the House is RADICAL and financially irresponsible on steroids.
Reclaiming the idea of 'conservatives' and 'liberals' is one of the challenges we face in restoring a civil approach to our political system. The perversion of the language may turn out to be the worst legacy of the last couple of decades.
... if we HAVE a "next election"!
There will be, too many people on both sides depend on it.