{"id":53320,"date":"2021-02-03T06:00:21","date_gmt":"2021-02-03T11:00:21","guid":{"rendered":"https:\/\/www.patheos.com\/blogs\/geneveith\/?p=53320"},"modified":"2021-01-31T08:12:22","modified_gmt":"2021-01-31T13:12:22","slug":"why-we-supposedly-dont-need-to-worry-about-the-national-debt","status":"publish","type":"post","link":"https:\/\/www.patheos.com\/blogs\/geneveith\/2021\/02\/why-we-supposedly-dont-need-to-worry-about-the-national-debt\/","title":{"rendered":"Why We (Supposedly) Don’t Need to Worry about the National Debt"},"content":{"rendered":"\n<\/head>

\u00a0<\/p>\n

\"\"<\/a><\/p>\n

Our federal government\u2019s debt is now some $21 trillion, as much as the entire national economy.\u00a0 President Trump was a big spender, and President Biden wants to add yet another multiple trillion dollar COVID relief package, plus more trillions for his environmental plan, plus more trillions for an infrastructure project, and more spending proposals in the works.<\/p>\n

I\u2019ve been trying to get my mind around this\u2013how our government can spend so much beyond its means and what the consequences might be of this level of deficit spending.<\/p>\n

I came across an article explaining why we don\u2019t need to worry about this.\u00a0 Basically, the argument is that interest rates are so low right now that we can borrow with almost little cost.\u00a0 And that there are plenty of buyers, including foreign governments, for American debt.\u00a0 Even though government bonds yield almost no interest, since the dollar is the world\u2019s currency of record and since the U.S. government can be relied upon not to default on its bonds, buying American debt is a good way for the world to store its money.<\/p>\n

\n

Here are some excerpts from the article in Politico<\/em> by Victoria Guida, entitled\u00a0Wall Street shrugs at Washington\u2019s debt pileup<\/a>, with the deck \u201cThe debt poses no imminent danger to U.S. finances, economists say, so the more pressing concern should be jump-starting the economy\u201d:<\/p>\n

\n

More than a decade of historically low rates, coupled with surging demand for safe investments like U.S. Treasury bonds, ensure that Biden can probably spend as much as he wants to revive the pandemic-battered economy and concentrate on the debt later, despite new alarms being raised by Republicans in particular. . . .<\/p>\n

The U.S. borrows money by selling bonds that are traded on the open market, and they can be owned by anyone from regular citizens to foreign governments. The more demand there is for those bonds, the lower the interest rate the government has to pay.<\/p>\n

These bonds, known as Treasury securities, are risk-free investments because the U.S. government is theoretically unable to default on its debt; if it needs to, it can just borrow more money to pay off its current obligations. Therefore, confidence in the stability of the federal government keeps demand high.<\/p>\n

\u201cThey don\u2019t have to \u2018pay back the debt,\u2019\u201d said Julia Coronado, a former Fed economist and president of MacroPolicy Perspectives. \u201cThat\u2019s just never how it\u2019s worked.\u201d . . .<\/p>\n

But the U.S. government\u2019s borrowing power goes even beyond that, thanks to the dollar\u2019s status as the world\u2019s reserve currency. Much of world trade is conducted in dollars, and countries and foreign governments have savings in the U.S. currency, so it is convenient for them to also own U.S. debt. Because demand for the dollar is so strong, the federal government can run higher deficits than any other country.<\/p>\n

[Keep reading. . .]<\/a><\/p>\n<\/blockquote>\n

This still sounds like voodoo economics.\u00a0 The article says that we can concentrate on the debt \u201clater,\u201d and that\u2019s what I\u2019m concerned about, the future consequences.\u00a0 If so much unbacked money pours into the economy, how can that not create inflation and other ills?\u00a0 If the American economy is no longer reliable, why would foreigners continue to park their dollars here?\u00a0 What makes us think that the dollar will always be the world\u2019s reserve currency or that the government\u2019s \u201cfull faith and credit\u201d in backing its bonds will still mean anything?<\/p>\n

Furthermore, one of the biggest owners of American debt is China<\/a>.\u00a0 Is it wise to owe so much money to an adversary, a rival that hopes to supplant us in economic strength and global influence?\u00a0 What about the principle that \u201cthe\u00a0borrower\u00a0is the slave of the lender\u201d (Proverbs 22:7)?\u00a0 If China decides to call in our debts or all of a sudden decides to stop buying our bonds, what would that do to us?<\/p>\n

But I\u2019m no economist, so what do I know?\u00a0 My worry is that our politicians are not economists either.\u00a0 And that quite a few economists aren\u2019t economists either.<\/p>\n

Do you agree with the article, that we don\u2019t need to worry about federal deficits, or do you see problems with this approach to government spending?<\/p>\n

\n<\/p>

Image by\u00a0Gerd Altmann<\/a>\u00a0from\u00a0Pixabay<\/a><\/em><\/p>\n<\/div>\n<\/body><\/html>\n","protected":false},"excerpt":{"rendered":"

Our federal government’s debt is now some $21 trillion, as much as the entire national economy, with more trillions of deficit spending on the way. An article explains why we shouldn’t worry about this. But I disagree.<\/p>\n","protected":false},"author":1281,"featured_media":53414,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[13,19],"tags":[3385,5840,1533],"class_list":["post-53320","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-economics","category-government","tag-deficit-spending","tag-federal-deficit","tag-national-debt"],"yoast_head":"\nWhy We (Supposedly) Don't Need to Worry about the National Debt<\/title>\n<meta name=\"description\" content=\"Our federal government's debt is now some $21 trillion, as much as the entire national economy, with more trillions of deficit spending on the way. An article explains why we shouldn't worry about this. 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