If the DEBT CEILING is not raised? What then?

[Jarhyn]

Is this one of your new weird things: "translation:"? Oky doky

translation:

View attachment 35681

Yet, the UBER BOOGIEMAN Debt Ceiling, didn't crash the known world when it was just raised, so your whole argument must be swiss cheese. That is how this Stupid Translation Thing works, isn't it?

Or there is something called reality, between your gibberish and real concerns about national debt...or do you even realize that there are millions of people living pay check to pay check, or SS check to SS check, that you would fuck over in your fantasy version of "its all just instant gratification"?

The current "debt ceiling" law could be changed into something that might be better, in the details of how it works. But to say there should be no "debt limit" policy -- law -- of any kind is the same as saying, again, aaaaaaaaa, fuck it! "We're all dead in the long run" anyway, so let's just have our instant gratification now and ignore the damage we're inflicting on those later who will pay the consequences.

Once you admit that this is what you're saying, then maybe you can argue the case against having a "debt limit" law. Because this "we're all dead in the long run" argument is the only logic to doing away with a "debt limit" law. You could make an argument for improving the "debt limit" law, so it works better, but to just do away with it makes no sense unless you're preaching that instant gratification is all that matters, and that there's no need to worry about the bad consequences 10 or 20 or 30 years later.

. . . weirdest part . . . is that this concept is only in place in about 2 other countries in the world. It is one thing to argue that there are sane ways to head back towards a balanced budget over a period of years (which is still just us mumbling into our mug of beer), but at least it doesn't appear to be a LSD trip...

translation: anything other than instant gratification is an LSD trip, and any effort to avoid bad consequences in the future is an LSD trip.

So Republicans/Trumpsters/Reds are right to disregard the need to reduce fossil fuel emissions, because it's an LSD trip to worry about 2 or 3 generations into the future. We can't do anything right now to fix any of the current bad consequences of climate change, even if we totally stop emitting carbons. All we can do now is make changes which will ensure a better future in 20 or 40 or 60 years from now, and so we should not do it, because instant gratification is all that matters.

That's the only argument anyone can give to not impose a "debt limit" or fix the debt problem.

Not at all, its just "the only argument" you seem to entertain while in what appears to be a LSD trip. The wheels are not coming off the bus. And you can (re)read my argument from post #20 right here on this thread:
https://talkfreethought.org/showthr...ised-What-then&p=942584&viewfull=1#post942584

Hey now, most of us while tripping on LSD gain a greater awareness of ourselves and our consciousness. It appears that Lumpy needs to invest in some testing kits...

 

[Canard DuJour]

If the DEBT CEILING is not raised? What then?

Apart from the immediate chaos, there'd be long term slow growth, probably following a debt deflation of the kind that has followed each and every sustained reduction of so-called "govt debt". See HERE.

Because govt "deficit" spending is the only source of debt-free money for a growing economy, barring an impossibly big trade surplus. That relationship is quite obvious in national accounting:





..and holds in all monetarily sovereign economies, i.e. govt "debt" is necessarily the mirror image of private debt. And it's always private debt, especially household debt that crashes the economy:

Why the Government Must Keep Running Deficits. Forever.

Isn’t it Time to Stop Calling it “The National Debt”?

 

[funinspace]

Hey now, most of us while tripping on LSD gain a greater awareness of ourselves and our consciousness. It appears that Lumpy needs to invest in some testing kits...

Ah, I wouldn't know, I'm pretty boring on this scale, as drunk is the druggiest I've been. I've seen friends on pot and quaaludes, so that wouldn't be a good joking reference. Maybe Crack?

 

[Swammerdami]

Why the Government Must Keep Running Deficits. Forever.

That story, describing a hypothetical two-household economy, links to the real story of the Capitol Hill Baby-Sitting Co-op which I'd read about a decade ago or so. I think such highly simplified "economies" are a good way to explain how simple some economic conception should be. ("Imagine a small community on an isolated island. Would it be productive to have some of the workers serve as health insurance auditors?") On the Other-Message-Board I tried to inform a Hyper-Libertarian that debt was useful by concocting a two-person scenario in which available cash (oysters) was inadequate for the worker ("Friday") to repair his canoe unless the landowner ("Crusoe") went into debt. (The Hyper-Libertarian refused to be informed.)

But government deficits are NOT mandatory for prosperity. (The useful role can instead be played by fractional-reserve private banks.) Two of the more prosperous periods in American history were the 1950's when the USG was running a huge surplus, and the 1990's when the Democrats worked the Reagan deficit down to zero.

(And of course the USG muddled along for 130 years with little federal debt until afore-mentioned WWI Liberty bonds. Two big exceptions were debt to buy Louisiana from Napoleon and the "greenbacks" — later redeemed for gold at face value — that Lincoln used to finance the Civil War.)

 

[laughing dog]

But government deficits are NOT mandatory for prosperity. (The useful role can instead be played by fractional-reserve private banks.) Two of the more prosperous periods in American history were the 1950's when the USG was running a huge surplus, and the 1990's when the Democrats worked the Reagan deficit down to zero.

The 1950s were a very good decade for the USA. It was the one of the few intact industrial economies after WWII. When all of your competitors are rebuilding (and buying from you to rebuild), it is not hard to enjoy good times. During the 1990s, the US did have more years of fiscal deficits than surpluses (1990-97 were deficits, 1998-2001 were surpluses - https://www.thoughtco.com/history-of-us-federal-budget-deficit-3321439).

You are correct, fiscal deficits are not required for prosperity. What is typically lost in the hysteria about deficits and debt at the Federal level are the real issues. The real issues are
1) the uses of the borrowing, and
2) the ability and effects of servicing the debt.

The USA engaged in massive borrowing (for the time) to finance our efforts in WWII. I don't think most people feel that was unwarranted or a bad idea on how to finance our efforts. In finance, we know that if one can earn a return that exceeds the cost of borrowing, one should borrow as much as one can. From what I can tell, a big issue with gov't deficit financing is determining whether the return exceeds the cost of borrowing because in many cases, the returns are not in cash flow form.

The other big issue is that people are numerically illiterate. They see the US debt in trillions of dollars and that frightens them. They ignore the value of the federal assets (which runs in trillions of dollars) and the ability to pay (which also runs in trillions of dollars).

 

[Loren Pechtel]

Why the Government Must Keep Running Deficits. Forever.

That story, describing a hypothetical two-household economy, links to the real story of the Capitol Hill Baby-Sitting Co-op which I'd read about a decade ago or so. I think such highly simplified "economies" are a good way to explain how simple some economic conception should be. ("Imagine a small community on an isolated island. Would it be productive to have some of the workers serve as health insurance auditors?") On the Other-Message-Board I tried to inform a Hyper-Libertarian that debt was useful by concocting a two-person scenario in which available cash (oysters) was inadequate for the worker ("Friday") to repair his canoe unless the landowner ("Crusoe") went into debt. (The Hyper-Libertarian refused to be informed.)

But government deficits are NOT mandatory for prosperity. (The useful role can instead be played by fractional-reserve private banks.) Two of the more prosperous periods in American history were the 1950's when the USG was running a huge surplus, and the 1990's when the Democrats worked the Reagan deficit down to zero.

(And of course the USG muddled along for 130 years with little federal debt until afore-mentioned WWI Liberty bonds. Two big exceptions were debt to buy Louisiana from Napoleon and the "greenbacks" — later redeemed for gold at face value — that Lincoln used to finance the Civil War.)

Actually, there is practical use for some public debt.

1) It provides a means of regulating the economy. Without public debt it would be much harder to keep the economy from whipsawing back and forth.

2) It provides a zero-risk storage of money.

Neither of these needs anything like the current levels, though.

 

[Canard DuJour]

Why the Government Must Keep Running Deficits. Forever.

That story, describing a hypothetical two-household economy, links to the real story of the Capitol Hill Baby-Sitting Co-op which I'd read about a decade ago or so. I think such highly simplified "economies" are a good way to explain how simple some economic conception should be. ("Imagine a small community on an isolated island. Would it be productive to have some of the workers serve as health insurance auditors?") On the Other-Message-Board I tried to inform a Hyper-Libertarian that debt was useful by concocting a two-person scenario in which available cash (oysters) was inadequate for the worker ("Friday") to repair his canoe unless the landowner ("Crusoe") went into debt. (The Hyper-Libertarian refused to be informed.)

But government deficits are NOT mandatory for prosperity. (The useful role can instead be played by fractional-reserve private banks.) Two of the more prosperous periods in American history were the 1950's when the USG was running a huge surplus, and the 1990's when the Democrats worked the Reagan deficit down to zero.

(And of course the USG muddled along for 130 years with little federal debt until afore-mentioned WWI Liberty bonds. Two big exceptions were debt to buy Louisiana from Napoleon and the "greenbacks" — later redeemed for gold at face value — that Lincoln used to finance the Civil War.)

My post linked to evidence that sustained govt surpluses precipitate depressions (not least during that 130 years), which you haven't quoted. Govt can run more frequent surpluses with a trade surplus, as the US had in the 1950s, but govt was still mostly in deficit and the surpluses still tended to end in recessions. As did the Clinton surplus.

If by "fractional reserve" you mean what private banks actually do (as opposed to the money multiplier model still found in some textbooks), I disagree. If that were the entirety of the money supply, you'd expect frequent debt deflations. As it is, reductions in federal debt tend to precede recessions and big reductions to precede depressions.

 

[Canard DuJour]

..the crux of it being:

Imagine if the cumulative government deficits today — the stock of money that government has spent into existence — were at the same level it was in 1900. The economy would be completely inoperable, locked up in primitive barter arrangements for lack of general-purpose money.

This is why government debt is not never, has not ever been, cannot ever be, paid off.

A growing economy needs a growing money supply, otherwise you have deflation. If it came entirely from commercial bank loans created as 'double entries' against borrowers' future incomes -at interest- then growth will keep stalling in debt deflations. As it does whenever govt tries to sustain surpluses, or even "balanced" budgets.

If people just can't get their heads round the idea that govt "deficits" and "debt" are neither intrinsically bad or good, then govt should STOP ISSUING BONDS whenever it spends money into circulation, and let a fiscal equivalent of the FOMC set upper net spending levels based on economic indicators. I.e a Chicago Plan-type monetary reform, as advocated by plenty of right wing economists - even Milton frickin Friedman.

 

[Loren Pechtel]

..the crux of it being:

Imagine if the cumulative government deficits today — the stock of money that government has spent into existence — were at the same level it was in 1900. The economy would be completely inoperable, locked up in primitive barter arrangements for lack of general-purpose money.

This is why government debt is not never, has not ever been, cannot ever be, paid off.

A growing economy needs a growing money supply, otherwise you have deflation. If it came entirely from commercial bank loans created as 'double entries' against borrowers' future incomes -at interest- then growth will keep stalling in debt deflations. As it does whenever govt tries to sustain surpluses, or even "balanced" budgets.

If people just can't get their heads round the idea that govt "deficits" and "debt" are neither intrinsically bad or good, then govt should STOP ISSUING BONDS whenever it spends money into circulation, and let a fiscal equivalent of the FOMC set upper net spending levels based on economic indicators. I.e a Chicago Plan-type monetary reform, as advocated by plenty of right wing economists - even Milton frickin Friedman.

Spending the money into existence to match the growth in the economy is a good thing. However, economic growth is far too low to support funding the government that way. You couldn't have even 10% of the current government using that model.

 

[Canard DuJour]

^ ^ WTF's he on about now?

 

[Lumpenproletariat]

Y'do what y'gotta do.

But you don't gotta keep lying that we must raise the debt ceiling in order to avoid default on the debt.

If need be the entire budget, every program, could be shut down -- zero funding to anything other than to pay the current debt obligation -- some programs/payments postponed, others canceled. The current debt payment is not 2 trillion $$$ all at once, as it would have to be to make it impossible for it to be paid. If everything currently funded -- Defense, SS, Medicare, etc. -- everything is suspended, or 60 or 70 or 80% of it, most worker paychecks postponed, etc., the necessary funding exists without increasing the debt. (And it's not close to that desperate.) Several arbitrary meat axes are available if necessary.

The President effectively has power to impound funds, because it would take police action to stop him, and there would be no such action. The Congress would be unable to authorize its own "police" to seize the President in order to stop him. What would happen is that there would be legal challenge, theoretically based on the law prohibiting the President from doing this, but no action taken to stop it, and the legal action would finally fail, as everyone would recognize that it had to be done. And even though some members of Congress would pretend they could stop him, they could not. The main reason he could not be stopped and the Congress could do nothing about it is that virtually everyone would recognize that in this case it was the only option -- no other choice.

So why is this option of 'well he has no choice' better than just ignoring the debt ceiling because Congressionally approved spending can be implicit approval for borrowing to spend it?

Good point. That rationale has been used like a dozen times to get around the war powers act, when Congress funds a military effort in some place, but doesn't declare war.

But this rationale is what comes into play if "ignoring the debt ceiling" is not what happens, and if instead a limit is placed on debt making it impossible to pay the present spending programs unless the creditors are shafted. This is what could happen if the Congress (legitimately) finally chooses to exercise its debt-limit power, which so far it isn't doing, because it always increases the "debt ceiling" before the deadline occurs. But it might finally make the choice to not increase the debt, which would be legitimate unless you believe that UNLIMITED DEBT is necessary and "in the end we're all dead" anyway, so don't worry about it.

So if Congress does finally go that route, a tough choice would have to be made somewhere.

A decision has to be made, either to prevent default on the debt (paying the creditors) and slash spending in order to pay the debt, or to default on the debt in order to have funds to pay all the current budget programs.

If the President takes the action unilaterally, maybe even illegally, to impound funds in order to pay the creditors, is this analogous to a President unilaterally taking military action he thinks is necessary, against the will of Congress?

If we agree that the President does in effect have such power -- even if it's technically illegal -- and he could do it and get away with it if nothing is done to stop him, then the argument for slashing spending in order instead to pay the current debt is similar, maybe the same, as the argument to let him start up his own personal war he claims is necessary to save the country from destruction.

But actually, the argument to pay that debt no matter what it takes is almost certainly more legitimate than any argument to let him initiate military hostilities on his own. The need to pay the debt is more obvious.

However, suppose hypothetically there's a case where there really is a military threat that could destroy the nation unless immediate offensive action is taken, before Congress can handle it. Like there's only a few minutes to decide before the whole country gets blown up somehow, which hypothetically could happen -- maybe a case where an asteroid will hit earth in 5 minutes and there's no time for Congress to do anything.

Perhaps in that case the President should take that action on his own, in effect becoming the Absolute Dictator for that moment because of the extreme crisis having to be resolved in a few minutes, even a few seconds, or all is lost.

So it's not the case that there's absolutely no scenario imaginable where the President should have such power. I.e., as long as our system is one which has such a thing as a "President" who is given the highest power over anyone else. Yet maybe we don't need such a system. The truth is that there's no absolute need for such a system. The highest power could be placed in a small committee that could act quickly because it's given that power and function to deal with something so immediate.

And that's all hypothetical. In our present reality, all we can do is ask what such a committee would decide if the debt issue was put to them, and if the debt had not been raised and yet payment to creditors is due, and the only funds available are those about to be paid to federal workers, contractors, entitlement recipients, etc. So in that case, what would the committee do, assuming that they understand fully what the risks are.

What would be the decision of a "perfect" decision-making system? Would it be better to let the creditors go unpaid, which means all future borrowing comes to an end, so that there can be no more deficit, beginning next fiscal year? so that in a year or so from now the federal budget would have to be slashed in half and all future budgets also slashed in half? including entitlement payments? far into the future?

Or would it be better to pay the creditors now, apply a meat-ax now to spending, slashing it 20 or 30 or 40% now, and then in a year trim the budget down a little, keep borrowing as needed, so that future spending could be maintained at 10% or so lower level than now, and future borrowing would still continue to maintain the future budget at that 10% lower level?

And on the other hand, what about the military action which the Congress doesn't have time to consider? Couldn't the small committee of 3 (or 5) also address that? If it's an asteroid about to strike earth in 5 minutes, why couldn't the committee of 3 be ready to convene immediately and take up such an emergency? If the decision is so spontaneous that it requires only 30 seconds, maybe even "the President" wouldn't be able to handle it.

In the case of the emergency military action (if it's legitimate), the reason there's a crisis is that the Congress simply doesn't have the time to deal with it. But in the case of the debt crisis, the problem is that the Congress cannot agree on what to do, even though it has time. It's not a time constraint, but conflicts of differing interests and ideologies preventing them from deciding, because there are too many decision-maker demagogues, and each one is worried about getting re-elected.

Maybe there needs to be a decision-maker who knows everything about the issue but who is not worried about getting re-elected. Which is not the reality, so all we can do is speculate what would be decided if we had a good system where such a crisis is decided rationally in the best interest of the whole country rather than only for narrow special interests and current political expediency.

Whatever hypothetical system there is, if it has the best motives, we should assume it would decide to put payment to the creditors as the higher priority, because of the future need to borrow, which outweighs the present need to pay the spending programs now only in order to cause much greater slashing of future spending much farther into the future.

It's clear that the long-term welfare of the nation requires paying the creditors now, no matter how much spending cuts are needed in the current budget programs. The President would have to make this decision, even if it was immediately unpopular, which is the only reason anyone can give why he should not do it. It would be a good example of JFK's "profiles in courage" for a President who would make that decision.

How can anyone suggest that only instant gratification now matters, which is the only reasoning for not cutting the programs in order to pay the creditors? The instant-gratification route of paying all the programs now and shafting the creditors would be a choice to put an end to all future borrowing and inflict far greater harm.


bottom-line moral of the story: Stop repeating the lie that not raising the debt ceiling means defaulting on the debt.

 

[laughing dog]

But you don't gotta keep lying that we must raise the debt ceiling in order to avoid default on the debt.

Good point. That rationale has been used like a dozen times to get around the war powers act, when Congress funds a military effort in some place, but doesn't declare war.

But this rationale is what comes into play if "ignoring the debt ceiling" is not what happens, and if instead a limit is placed on debt making it impossible to pay the present spending programs unless the creditors are shafted. This is what could happen if the Congress (legitimately) finally chooses to exercise its debt-limit power, which so far it isn't doing, because it always increases the "debt ceiling" before the deadline occurs. But it might finally make the choice to not increase the debt, which would be legitimate unless you believe that UNLIMITED DEBT is necessary and "in the end we're all dead" anyway, so don't worry about it.

So if Congress does finally go that route, a tough choice would have to be made somewhere.

A decision has to be made, either to prevent default on the debt (paying the creditors) and slash spending in order to pay the debt, or to default on the debt in order to have funds to pay all the current budget programs.

If the President takes the action unilaterally, maybe even illegally, to impound funds in order to pay the creditors, is this analogous to a President unilaterally taking military action he thinks is necessary, against the will of Congress?

If we agree that the President does in effect have such power -- even if it's technically illegal -- and he could do it and get away with it if nothing is done to stop him, then the argument for slashing spending in order instead to pay the current debt is similar, maybe the same, as the argument to let him start up his own personal war he claims is necessary to save the country from destruction.

But actually, the argument to pay that debt no matter what it takes is almost certainly more legitimate than any argument to let him initiate military hostilities on his own. The need to pay the debt is more obvious.

However, suppose hypothetically there's a case where there really is a military threat that could destroy the nation unless immediate offensive action is taken, before Congress can handle it. Like there's only a few minutes to decide before the whole country gets blown up somehow, which hypothetically could happen -- maybe a case where an asteroid will hit earth in 5 minutes and there's no time for Congress to do anything.

Perhaps in that case the President should take that action on his own, in effect becoming the Absolute Dictator for that moment because of the extreme crisis having to be resolved in a few minutes, even a few seconds, or all is lost.

So it's not the case that there's absolutely no scenario imaginable where the President should have such power. I.e., as long as our system is one which has such a thing as a "President" who is given the highest power over anyone else. Yet maybe we don't need such a system. The truth is that there's no absolute need for such a system. The highest power could be placed in a small committee that could act quickly because it's given that power and function to deal with something so immediate.

And that's all hypothetical. In our present reality, all we can do is ask what such a committee would decide if the debt issue was put to them, and if the debt had not been raised and yet payment to creditors is due, and the only funds available are those about to be paid to federal workers, contractors, entitlement recipients, etc. So in that case, what would the committee do, assuming that they understand fully what the risks are.

What would be the decision of a "perfect" decision-making system? Would it be better to let the creditors go unpaid, which means all future borrowing comes to an end, so that there can be no more deficit, beginning next fiscal year? so that in a year or so from now the federal budget would have to be slashed in half and all future budgets also slashed in half? including entitlement payments? far into the future?

Or would it be better to pay the creditors now, apply a meat-ax now to spending, slashing it 20 or 30 or 40% now, and then in a year trim the budget down a little, keep borrowing as needed, so that future spending could be maintained at 10% or so lower level than now, and future borrowing would still continue to maintain the future budget at that 10% lower level?

And on the other hand, what about the military action which the Congress doesn't have time to consider? Couldn't the small committee of 3 (or 5) also address that? If it's an asteroid about to strike earth in 5 minutes, why couldn't the committee of 3 be ready to convene immediately and take up such an emergency? If the decision is so spontaneous that it requires only 30 seconds, maybe even "the President" wouldn't be able to handle it.

In the case of the emergency military action (if it's legitimate), the reason there's a crisis is that the Congress simply doesn't have the time to deal with it. But in the case of the debt crisis, the problem is that the Congress cannot agree on what to do, even though it has time. It's not a time constraint, but conflicts of differing interests and ideologies preventing them from deciding, because there are too many decision-maker demagogues, and each one is worried about getting re-elected.

Maybe there needs to be a decision-maker who knows everything about the issue but who is not worried about getting re-elected. Which is not the reality, so all we can do is speculate what would be decided if we had a good system where such a crisis is decided rationally in the best interest of the whole country rather than only for narrow special interests and current political expediency.

Whatever hypothetical system there is, if it has the best motives, we should assume it would decide to put payment to the creditors as the higher priority, because of the future need to borrow, which outweighs the present need to pay the spending programs now only in order to cause much greater slashing of future spending much farther into the future.

It's clear that the long-term welfare of the nation requires paying the creditors now, no matter how much spending cuts are needed in the current budget programs. The President would have to make this decision, even if it was immediately unpopular, which is the only reason anyone can give why he should not do it. It would be a good example of JFK's "profiles in courage" for a President who would make that decision.

How can anyone suggest that only instant gratification now matters, which is the only reasoning for not cutting the programs in order to pay the creditors? The instant-gratification route of paying all the programs now and shafting the creditors would be a choice to put an end to all future borrowing and inflict far greater harm.


bottom-line moral of the story: Stop repeating the lie that not raising the debt ceiling means defaulting on the debt.

Walls of text do not substitute for actual thinking. The entire word salad is based on some counterfactual assumptions. For example,
"Would it be better to let the creditors go unpaid, which means all future borrowing comes to an end, so that there can be no more deficit, beginning next fiscal year? " wrongly assumes that
1) dealing with a hard debt limit requires defaulting on all the debt, and
2) defaulting on debt means no one will ever lend to the US again.

A hard debt limit might mean defaulting on the debt that comes due at any given time - not the entire debt. Moreover, since a significant chunk of the federal debt is held by various arms of the federal gov't, defaulting on that debt would have no direct effect on other creditors.

Many countries in the history of the world have repudiated some of the debt. All of them regained access to credit markets, so the 2nd assumption is also bogus.

Here is another unsubstantiated assumption in that "analysis" -
"we should assume it would decide to put payment to the creditors as the higher priority, because of the future need to borrow, which outweighs the present need to pay the spending programs now only in order to cause much greater slashing of future spending much farther into the future."

As shown, the future need to borrow is not really in danger. Moreover, there is no logical reason to assume that greater slashing of future spending would be necessary - simply constraining increases in spending to less than the increase in revenue may take care of the problem in the long run if there is economic growth at all.

Once again, Lumpy promotes kneejerk crybaby chickenlittle economics over historically-based rational thinking.

 

[funinspace]

Good point. That rationale has been used like a dozen times to get around the war powers act, when Congress funds a military effort in some place, but doesn't declare war.

But this rationale is what comes into play if "ignoring the debt ceiling" is not what happens, and if instead a limit is placed on debt making it impossible to pay the present spending programs unless the creditors are shafted. This is what could happen if the Congress (legitimately) finally chooses to exercise its debt-limit power, which so far it isn't doing, because it always increases the "debt ceiling" before the deadline occurs.

Uh, no the above fantasy version is what a President could try if the debt ceiling wasn't raised AND Congress approves a budget spending more than the debt ceiling would allow for. It is just another fantasy paper exercise, similar to yours...

<snipped keyboard barf after eyes glazed over...>

bottom-line moral of the story: Stop repeating the lie that not raising the debt ceiling means defaulting on the debt.

Maybe you should stop lying about what I have said...as I haven't said that.

 

[Canard DuJour]

I haven't read the whole thread, but it usually becomes evident that people hyperventilating about 'national debt' don't know what it is. The misleading language leads them to equate it with household debt. A recent FED publication was unusually candid and illuminating:

Does the National Debt Matter?

Most people have a very personal view of the nature of debt. We know that high levels of debt and deficit spending at the household level are not sustainable. At some point, household debt has to be paid back. If a household is unable to do so, its debt will have to be renegotiated. It is natural to think that the same must hold true for governments. But this “government as a household” analogy is imperfect, at best. The analogy breaks down for several reasons.

Debt Issuance

While a household has a finite lifespan, a government has an indefinite planning horizon. So, while a household must eventually retire its debt, a government can refinance (or roll over) its debt indefinitely.

Yes, debt has to be repaid when it comes due. But maturing debt can be replaced with newly issued debt. Rolling over the debt in this manner means that it need never be “paid back.” Indeed, it may even grow over time in line with the scale of the economy’s operations as measured by population or GDP.

Unlike personal debt, the national debt consists mainly of marketable securities issued by the U.S. Treasury as bonds. It is of some interest to note that the Treasury Department issued some of its securities in the form of small-denomination bills, called United States Notes, from 1862-1971 that are largely indistinguishable from the currency issued by the Federal Reserve today.

(...)

Ultimately, the federal government has control over the supply of the nation’s legal tender. Both of the notes above have been legal tender since the gold recall of 1933. Now, consider the fact that the national debt consists of U.S. Treasury securities payable in legal tender. That is, imagine the national debt consisting of interest-bearing versions of the U.S. Note shown above.

When the interest comes due, it can be paid in legal tender—that is, by printing additional U.S. or Federal Reserve Notes. It follows that a technical default can only occur if the government permits it. The situation here is similar to that of a corporation financing itself with debt convertible to equity at the issuer’s discretion. Involuntary default is essentially impossible.3 This aspect of U.S. Treasury securities renders them highly desirable for investors seeking safety—a property which again serves to drive down their yields relative to other securities.


Debt as Currency

To the extent that the national debt is held domestically, it constitutes domestic private sector wealth. The extent to which it constitutes net wealth can be debated, but there’s not much doubt that at least some of it is viewed in this manner.4 The implication of this is that increasing the national debt makes individuals feel wealthier.

When this “wealth effect” is generated by a deficit-financed tax cut (or transfers) in a depression, it can help stimulate private spending, making everyone better off. When the economy is at or near full employment, however, such a policy is instead more likely to increase the price level, which can lead to a redistribution of wealth.

Together, these considerations suggest that we might want to look at the national debt from a different perspective. In particular, it seems more accurate to view the national debt less as form of debt and more as a form of money in circulation.

Investors value the securities making up the national debt in the same way individuals value money — as a medium of exchange and a safe store of wealth. The idea of having to pay back money already in circulation makes little sense, in this context. Of course, not having to worry about paying back the national debt does not mean there is nothing to be concerned about. But if the national debt is a form of money, wherein lies the concern?

(full article: https://www.stlouisfed.org/publicat...fourth-quarter-2020/does-national-debt-matter