2018 interest expense on US national debt
$175B in interest alone…American economic and political hubris is a dangerous thing.
If the American (nay, the global economy given how inter- and co-dependent we all are) economy never falters and continues on its way up then, I’ll concede, our national debt is not economically dangerous (though I’d still say it’s a terrible example…) But we KNOW what is going to happen to entitlement spending as the boomers retire. We KNOW what is going to happen to the tax base with the boomers retire. Wait… increasing cost and decreasing revenue ties to the same event?
… and borrowing more is a good idea ‘cuz why?
Imagine you’re twenty years old and have $1k in credit card debt and you believe that your income with never do anything but increase. If that “confidence” is well-placed and your income never takes a gap, always rises, you never need to take parental leave or, god forbid, disability then you can rationally allow your personal debt to increase along with income.
This is the fundamental argument of the “US National Debt doesn’t matter” crowd.
If, however, you stumble, there is a recession and you are laid off or need to take a disability NOW your ability to service that debt is in danger. You may need to borrow just to pay the interest on your other debts. What happens if that gets out and the cost of capital increases – you end up taking payday loans at usurious rates to pay the interest on the loan you took to pay the interest on the first loan. Moreover, if you KNOW (see point about boomers) that your costs will increase and wages will decrease you’re an IDIOT to borrow more. Yet, this is what we do.
How about this – legislators must each put $100k into T-bills for each $1T that gets added to the US debt during their term.
Legislators, you are welcome to borrow the $100k (at full recourse and ineligible for discharge during bankruptcy) to fund the t-bill purchase.
If our borrowing costs don’t exceed 0.75% of GDP (roughly current/2018 levels) during the ten (10) year period after their term then they get to redeem the treasuries. If that costs exceeds the threshold they forfeit their t-bills with proceeds going to pay down the debt.
It is unhealthy and dangerous to separate Authority and Responsibility in any/every situation and yet we’ve done it with our nations treasure.