The US owes 100% of its GDP in debt. That is 1 year of prosperity. It is similar as if you owed 1 year of salary. $100,000... $120,000? However it is only similar. The US Government, who owes the debt, doesn't actually get the money from the GDP. That is the combined revenue of everybody in the country. The US Government gets only a certain amount in tax each year, and so the US debt is actually many many times its income. Here is the real revenue of the US Government by source: The US debt is $16 Trillion dollars. That puts the US debt at 7 times the US Government income. Is the $2.3 Trillion income figure accurate? How else is the US making money? Stealing Libya's gold reserves? Stealing Iraq's gold reserves and canceling Iraq's international debt obligations? Canceling debt owed to Iraq and Libya and making concessions with countries in exchange? Stealing Iraqi oil revenue? Would you be comfortable owing 7 times your yearly income, and would it lead you to barbaric thievery?
The debt is among many extreme USA problems. The bond bubble will burst, it has to, the currency will also plummet into worthlessness especially when the "quantitative easing" and money fabrication to fight currency wars reaches critical breaking point, and as long as the financial fraud by the rich is allowed to continue unabated to the point that the working class have nothing left (they are nearly there now) and riots worse than anything Greece or Spain have seen ensue. One will set off the others. There's MAJOR problems ahead and people need to pull their head out of their ass. The impending disaster, the Great Depression 2 which will make the first one look like prosperity, will have little to nothing to do with any Mexicans or food stamps.
The debt is not a big deal, stop living in fear. As soon as a Republican gets in the white house, your media overlords will reeducate you on the deficit, and you will forget all about it.
It's not a problem. The interest rate on T-Bills is extremely low. It will remain extremely low because the US is in an extremely unique position in the world monetary system. No one will be scared away from dollar-denominated assets since other countries' assets look even worse. Since those other countries back their currency with the dollar, increased US debt would make their currencies look just as bad as it would make the dollar look. The result is that other currencies are largely institutionally unable to look relatively less risky than the dollar. If the dollars looks less risky than all other currencies, its interest rate will remain very low. And that's not even mentioning that the Fed can ensure a low interest rate. Your post is predicated on this idea that having debt of 7 times your income is bad. First off, unlike households, the government can easily increase that "income" simply by raising taxes. You may say "OMG RAISING TAXES!!!111 THIS IS SO BAD!!!" However, it's not bad if the spending that creates that debt has an economic rate of return greater than the interest rate. Since our interest rate is so low, many things qualify for this. More importantly, though, just saying "Would you be comfortable owing 7 times your yearly income" is not a valid comparison. Households that owe debt owe it in mortgages, credit cards, car payments, etc. These things carry interests rates around 10%. On the other hand, most T-Bills carry interest rates of less than 1%. Naturally, with a lower interest rate, you can carry more debt. Think about it this way. In the last 10 years, the interest on our debt has taken up a very steady roughly 400 billion dollars a year. Our revenues are now roughly 2.5 trillion dollars. That means, we are paying 16% of our "income" in debt. If you want to make the household comparison, do it based on that. Most households would LOVE to be paying only 16% of their income paying back debt. And we certainly wouldn't say households with that number have a problem.
The argument that interest rates are extremely low is a dangerous one, IMO. Interest rates are extremely low now because we've been in a recession with deflationary pressures that has allowed the Fed to maintain low interest rates without significant inflation. When the economy picks up, and money velocity and lending and employment increase, inflation will invariably start to increase, and the Fed will start selling assets and raise rates. The US Govt interest obligation will invariably increase, crowding out the availability of funds to pay for other things, just as the baby boomer start retiring and moving into Medicare en masse. It is not unmanageable, but it is a bad situation and a tragerdy that decades of fiscal irresponsibility has needlessly put us into. We need a plan to get the deficit substantially below GDP growth, if not a surplus. We spent the 80s and 00s partying and the 10s so far paying for a colossal market collapse. We need leaders who will do the tough thing and raise taxes and get spending back down to less than 20% of GDP. But mostly we see politicians more interested in pandering to their base (the Pass the Buck generation) rather than doing what is right for the country.
Debt by itself is a problem. It is a simple syllogism of logic to conclude the person holding the debt holds a problem therefore it is reasonable to say they have a debt problem. If debt were not a problem it would not cause problems. It does. Ergo it is a problem. QED.
I think interest rates are bound to go up since I agree that there will eventually be inflationary pressures. However, with higher inflation comes higher incomes and more tax revenue. Furthermore, even if interest rates get higher, I think institutional factors that I've spoken of would stop it from being a huge crisis. We would just have higher interest payments on the debt. While I don't think those higher interest payments would collapse our economy at all, you're right that we can't keep on this debt path for forever; eventually it would scare the world into backing their currencies with something else, which limits our power/makes us more vulnerable. If it didn't do that, it would eventually lead to global financial instability as a lack of confidence in the dollar undermined currencies back by it as well (making there essentially be less confidence in everything). However, I do not think right now is quite the time to get ourselves off this path. The world economy is starting to get back on track, but it's not quite there yet. I think we have to act as the central government does in a typical Keynesian model; that is, we should spend when no one else is willing to because we are more able to sustain debt levels than anyone else. Then, once the economy gets back on track, we should again act as the central government does in the Keynesian model; cut spending in order to stop the economy from overheating.
But the interest rate has a multiplier effect that is leverage. For example, an increase of 1% to 3% interest effective triples the interest expenses (putting aside the fact that the debt matures at different times). Incomes are not tripled with an increase in interest rates (excepting those that derive their income from fixed income investments). Higher interest payments reduce the ability to spend on other things. I agree that slashing spending would be unwise and put us back into recession. However, there are trillions of dollars and trillions of income that are sitting in accounts doing nothing. We should tap more of those resources through taxes and turn them into spending that produces demand and a stronger economy. - - - Updated - - - But the interest rate has a multiplier effect that is leverage. For example, an increase of 1% to 3% interest effective triples the interest expenses (putting aside the fact that the debt matures at different times). Incomes are not tripled with an increase in interest rates (excepting those that derive their income from fixed income investments). Higher interest payments reduce the ability to spend on other things. I agree that slashing spending would be unwise and put us back into recession. However, there are trillions of dollars and trillions of income that are sitting in accounts doing nothing. We should tap more of those resources through taxes and turn them into spending that produces demand and a stronger economy.
