The U.S. national debt surpassed $34 trillion this week, marking a grim milestone as federal debt continues to rise at a record pace under persistent annual deficits, according to the Treasury Department.
All I know is that for all of my 46 years, I’ve been told what the national debt is as if it is significant and it keeps going up and it doesn’t seem to have any effect on anything.
The significant thing, which is harder to gauge, is how much return the country gets on its borrowing. If you borrow $1B for some infrastructure project, to be paid back over 25 years, but over those 25 years the infrastructure project generates $1.5B in taxes, job opportunities, time saved, etc, and then it continues to generate more money even after the debt has been paid off, then taking on the debt was a good thing in the long run. Sure, the national debt went up, and generally owing money is seen as bad, but it was profitable overall and the country’s GDP maybe have increased at a higher rate than its debt over that period.
And it gets even more complex when you consider less tangible results like the happiness of the population. If the country breaks even on its borrowing but the population’s happiness is increased, I think most people would consider it a success, but it’s hard to measure that.
A lot of the people who get overly panicky about national debts don’t tend to understand them. They treat them like household budgets, or like businesses, where you absolutely need to balance your books every year or you’re in trouble. With national debts, as long as the country can keep paying back its lenders and as long as they continue to grow (economically), national debts aren’t that big a deal at all.
Generally, left-wing economics tends to lean towards borrowing as an investment into the future, and isn’t too concerned with the actual debt number increasing as long as things are improving at a good rate. Right-wing economics tends to lean towards being loud about the national debt increasing and lean towards austerity and other cuts in order to “balance the books”, often calling the left-wing approach “irresponsible”. Personally, if it’s not obvious, I favour the left-wing approach.
Thanks, I’m glad you found it useful! Unfortunately, I don’t have any specific recommendations for further reading - it’s the sort of thing I’ve just picked up over the years of paying attention to politics and economics rather than from any specific sources.
The key graph to look at on that page is the one that shows the debt to GDP ratio (which, as it explains, is the most useful way to measure debt because it shows the country’s ability to repay its loans). And you can see, despite the fact that Biden’s administration has hit the highest ever raw national debt number, they’ve actually done a pretty good job at stabilising this ratio after the disaster that was Trump’s term.
(To be fair to Trump, COVID was responsible for some of that big upwards spike. But you can see it was trending upwards - ie, bad - under Trump before COVID started.)
Which means that, yes, the national debt has continued to rise in real numbers under Biden, but the US economy has also been growing at a similar rate, meaning nothing’s got any worse in real terms.
This is because it doesn’t really matter. We could just mint a few trillion dollar coins if we had to to make a payment on it. We probably would only get 1/2 the inflation we did coming out of the pandemic as a lot of that was geopolitics that’s already priced in now, though corporate greed is another matter. We also could just revert a bunch of the tax cuts from the last 20 years or so, and probably make a dent in the deficit if not get to a surplus again.
My limited understanding is that economists are divided around if too high a debt percentage is what led to Japan’s stagflation, but from what I’ve read the US had that since the 70s already in real wage terms, so would it actually be a change to most people? And it’s not like Japan is some failed hellscape - it’s a huge economy with a pretty decent standard of living from what I can tell.
I still maintain so much of this is driven by thinking there isn’t some limit here - like we talk about “tiny” GDP growth compared to developing economies without realizing that if you start at $1, it’s easy to have 500% growth in a year, but each year the absolute amount of growth needed to hit that percentage goes up. The US only managing to grow 1% on a what, 30 trillion GDP is actually 300 billion, which is a huge absolute amount. That’s like an entire Merck, Costco, or Adobe each year added enmasse.
All I know is that for all of my 46 years, I’ve been told what the national debt is as if it is significant and it keeps going up and it doesn’t seem to have any effect on anything.
The significant thing, which is harder to gauge, is how much return the country gets on its borrowing. If you borrow $1B for some infrastructure project, to be paid back over 25 years, but over those 25 years the infrastructure project generates $1.5B in taxes, job opportunities, time saved, etc, and then it continues to generate more money even after the debt has been paid off, then taking on the debt was a good thing in the long run. Sure, the national debt went up, and generally owing money is seen as bad, but it was profitable overall and the country’s GDP maybe have increased at a higher rate than its debt over that period.
And it gets even more complex when you consider less tangible results like the happiness of the population. If the country breaks even on its borrowing but the population’s happiness is increased, I think most people would consider it a success, but it’s hard to measure that.
A lot of the people who get overly panicky about national debts don’t tend to understand them. They treat them like household budgets, or like businesses, where you absolutely need to balance your books every year or you’re in trouble. With national debts, as long as the country can keep paying back its lenders and as long as they continue to grow (economically), national debts aren’t that big a deal at all.
Generally, left-wing economics tends to lean towards borrowing as an investment into the future, and isn’t too concerned with the actual debt number increasing as long as things are improving at a good rate. Right-wing economics tends to lean towards being loud about the national debt increasing and lean towards austerity and other cuts in order to “balance the books”, often calling the left-wing approach “irresponsible”. Personally, if it’s not obvious, I favour the left-wing approach.
That’s pretty good insight laid out in a very clear to understand manner, do you have any recommendations for where I could read more about this?
Thanks, I’m glad you found it useful! Unfortunately, I don’t have any specific recommendations for further reading - it’s the sort of thing I’ve just picked up over the years of paying attention to politics and economics rather than from any specific sources.
However, after a quick search, the US Treasury actually has a pretty good page about it.
The key graph to look at on that page is the one that shows the debt to GDP ratio (which, as it explains, is the most useful way to measure debt because it shows the country’s ability to repay its loans). And you can see, despite the fact that Biden’s administration has hit the highest ever raw national debt number, they’ve actually done a pretty good job at stabilising this ratio after the disaster that was Trump’s term.
(To be fair to Trump, COVID was responsible for some of that big upwards spike. But you can see it was trending upwards - ie, bad - under Trump before COVID started.)
Which means that, yes, the national debt has continued to rise in real numbers under Biden, but the US economy has also been growing at a similar rate, meaning nothing’s got any worse in real terms.
The BBC also has a pretty good overview of national debt. It’s relating to the UK but the principles are still the same.
This is because it doesn’t really matter. We could just mint a few trillion dollar coins if we had to to make a payment on it. We probably would only get 1/2 the inflation we did coming out of the pandemic as a lot of that was geopolitics that’s already priced in now, though corporate greed is another matter. We also could just revert a bunch of the tax cuts from the last 20 years or so, and probably make a dent in the deficit if not get to a surplus again.
My limited understanding is that economists are divided around if too high a debt percentage is what led to Japan’s stagflation, but from what I’ve read the US had that since the 70s already in real wage terms, so would it actually be a change to most people? And it’s not like Japan is some failed hellscape - it’s a huge economy with a pretty decent standard of living from what I can tell.
I still maintain so much of this is driven by thinking there isn’t some limit here - like we talk about “tiny” GDP growth compared to developing economies without realizing that if you start at $1, it’s easy to have 500% growth in a year, but each year the absolute amount of growth needed to hit that percentage goes up. The US only managing to grow 1% on a what, 30 trillion GDP is actually 300 billion, which is a huge absolute amount. That’s like an entire Merck, Costco, or Adobe each year added enmasse.