Question

4. How serious is the national debt to our economic stability? (not less than 300 words)

Answer 1

While still manageable, the US debt is rising at a pace that is obviously unsustainable and unpalatable, and risks causing economic uncertainty. Just a minor error (failure to support a bill to raise the debt, lack of faith in the capacity of the US government to service the debt) may have major adverse effects, as seen when recent delays in passing bills or budgets occurred and the US government was shut down except for critical functions.

However if we can finally pay off or service the debt without any lack of confidence in the US government, the effect is to drive debt repayment into future generations who will have to pay off those debts one way or another over time. This will crowd out future government spending or potentially force taxation, all of which would affect future generations. Running up debts today is a formula for getting less to invest and enjoy in the future (just as it is for persons). The bigger the debt now, the less ability the government will have to borrow and invest in times of crisis or national crises in the future, and the higher the borrowing rates are likely to be in future.

Many of the responses do not seem to really grasp the currency structure and say that we should only print money to pay off the debt. We can't and we will not. Countries which have attempted this method have rapidly discovered how damaging it can be over the past 150 years. It does not work in the end. Inflation and market volatility causes economic costs and losses, and discourages investment. Additionally, the amount of money in the economy is limited in real terms so that printing money will pay off a fraction of the US debt in just about any year. At some point, creditors will start demanding that potential government borrowing be in another currency, or tied to inflation, so that printing money to pay off debt is inefficient, potentially costing us more.

Finally, as the public debt accumulates, it competes for money, and the interest on the debt starts to become a big part of the US economy and budget deficit. If we continue to print money, the inflation rate would push the interest rate and debt service cost forward as the U.S. government tries to refinance its debt (which is continuously happening) or borrow more.