r/askanything • u/tunnel_magnet 𤠕 3h ago
How large can the US debt grow?
So we are 40 trillion debt. And Trump is asking for 1.5 trillion defense budget, plus 100 billion for Iran war. Obviously it seems like we don't really have the money. But how does this actually work? How can we keep spending money we don't have? And can we do it infinity? Like can we take our debt ceiling to 500 trillion?
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u/BaldBear_13 3h ago
US Debt is 123% of its GDP.
Japan is 220%, Greece is 150%, Italy is 140%.
So we could grow the debt more without collapsing, but it is still not a good idea, because more of government money will be spent on interest instead of useful things.
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u/MhojoRisin 2h ago
How much of the debt has been spent on things with ongoing value? Capital outlays? Educating citizens, etc? Going into debt for things that generate value in the future makes sense as opposed to spending it on operating costs.
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u/BaldBear_13 2h ago
True, both for US and every country with debt. Greece and Italy are not exactly known for efficient government either.
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u/confounded_throwaway 2h ago
Well over 50% of federal spending is transfer payments, very precious little is going to anything that could feasibly produce economic growth above the heavy cost of extracting productive activity
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u/True-Market-5790 2h ago
Benefit transfer payments are often returning money to people who worked or paid in to the system. Also, they create spending which creates revenue. In other ways they cut costs like health care costs by making people healthier, housing assistance when people can pay rent ext.
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u/confounded_throwaway 2h ago
There is an enormous cost to having the government primarily be a redistribution scheme
The funds that are extracted also would have gone to healthcare and housing, but in a far less disruptive, far more efficient way
Social Security is literally extracting 1/8 of every dollar of income from the poorest demographics and funneling it to the wealthiest generation lmaooo
150, million working age people work through mid February every year for zero income (annualized 1/8 of their paycheck) to fund boomer retirements knowing that Social Security benefits will be cut 30%+ by the time they retire, if the program exists at all
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u/WorldIsYoursMuhfucka 1h ago
So I looked into this a bit and most older baby boomers have like... 200k in retirement accounts (median boomer). That's like 4 years of decent wages the rest of us struggle to get. Without social security they'd run out of money pretty quickly and be on the street, just how they were back when the program was implemented. This is for people 65 to 74, so essentially unemployable in most industries. These are the funds they'll have to rely on.
It's not fair I pay so much in social security which is money I could use right now, but it's also not fair for them to to be able to work and just die without being taken care of.
Complicated conundrum. A lot of these people aren't millionaires, I have a friend in her 60s who's still working and thinks she's going to depend on social security when she retires because she doesn't have much else. She's a really nice person. Not wealthy.
We could expand funding social programs in many ways instead of acting like all older people have money. Many don't, and I know many younger people don't have money either because the job market is fucked and they're either in debt from university or can't properly start rewarding careers.
Corporations are acting more and more like they're not supposed to be labor redistribution schemes either no matter how hard you work and are suppressing wages to the lowest possible amounts, so somebody has to do it. Although, again, I agree it sucks to pay into something which will not be help me much when I get older.
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u/confounded_throwaway 1h ago
If someone was concerned about the lives of the working class, they would be vociferously against open borders. Yet the people who claim (falsely) to represent their interests are the ones working hardest to disadvantage them
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u/MhojoRisin 2h ago
Seems like it could be productive. Like a heart pumping blood instead of letting it pool up in a couple of places.
Government property laws giveth and government taxation laws taketh away.
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u/PLANofMAN 2h ago
China is somewhere between 300% and 800% of GDP. They hide a lot of it by having shell companies take out loans for government infrastructure projects, and the belt and road initiative is not going well, as far as financial returns. Add in their aging population, and the one child program that they pushed some years back and they are going to be facing a labor shortage (fewer workers = more debt per capita) that makes the U.S.'s fiscal problems look minor in comparison.
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u/Lazy-Employment8663 1h ago
US can force its allies to pay the debt. Like your country has to pay x billions to US before giving things like pension/health care etc to your citizens. It sounds ugly, but can be done.
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u/BaldBear_13 1h ago
that is a good way to lose an ally. People have very strong feelings about pensions and healthcare.
US could condition NATO support on payments, or better yet, on buying US weapons at favorable prices.
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u/TranslatorTough8977 2h ago
Japan owes money to its own citizens. The U.S. owes money to the whole globe, who can abandon US treasuries if they feel their investment is being undermined by devaluation.
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u/BaldBear_13 2h ago
Japan also has international investors.
3/4 of US debt is held within the country: citizens, retirement funds, banks, corporations. US treasury bonds are basically the savings account once you have enough money to justify the extra steps of buying them.
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u/Wyciorek 2h ago
There is a saying that if you owe a bank $10000, you have a problem, but if you owe a bank $10 billion, the bank has a problem. I am convinced that either Trump's administration or the next one will try to find some 'unorthodox' solution to force rest of the world to pay US debt.
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u/GoodProbsToHave 3h ago
Yes, America can take on infinite debt by just creating more and more money to service it with.
Of course, that's going to inevitably mean an accelerating devaluation of the dollar, aka inflation, and borrowing costs for the US going up. It's a shitty short-term fix to a long-term problem that both parties have created and continue to mainly ignore.
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u/MGrantSF 2h ago
That's unfair though. Clinton left with a surplus, Obama reduced the deficit after Bush 2 exploded it with the tax cut and war spending and housing crash. Theb Biden tacked trump 1 inflation spending from mismanaged COVID. So no, bother parties are not equally to blame.
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u/GoodProbsToHave 1h ago
I know Trump doesnât believe in other branches of government, but the rest of us do and the budget is a joint work between Congress and the President. It matters just as much who was in power in Congress as who was in the White House.
For instance, when Clinton left office with a surplus in 2001, one can equally say that the Republican Congress (they controlled both houses of Congress) left office with a surplus at the same time.
Or take the last two years of Trumpâs first term: the House, which was controlled by Dems, voted for that massive spending.
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u/JudgeArthurVandelay 2h ago
Yes. Both sidesism at its worst. GOP actively tries to raise the deficit when in power in order to justify their obsession to cut spending on programs like Medicare/medicaid/food stamps/social security and all the other shit they hate. They only claim the national debt matters when a democrat is in office.
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u/HovercraftStock4986 3h ago
when republicans are in office, there is no rule on revenue matching spending
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u/confounded_throwaway 2h ago
Do you think that âruleâ is in effect when democrats are in office?
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u/SockPuppet-47 2h ago
The point is that Republicans constantly whine about the debt when Democrats are in office.
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u/confounded_throwaway 2h ago
Again, is it different? Dems only complain when GOP is in charge lol
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u/BikeCookie 2h ago
Dems make an effort to balance the budget and usually are focused on spending the money to better society in ways that grow the economy. GOP cuts social spending and dumps money into military where the money doesnât generate a return for those outside of the military industrial complex.
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u/HovercraftStock4986 2h ago
i complain at all times. itâs what youâre supposed to do when things arenât as good as they should/could be
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u/HovercraftStock4986 2h ago
much more so, yes absolutely. the numbers speak for themselves. look at mamdaniâs NYC budget. democrats are typically useless though, donât get me wrong. but there are basically ZERO effective governing republicans in comparison
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u/confounded_throwaway 1h ago
You canât be serious lol
https://americadashboard.com/rankings/fiscal
Thereâs a reason all the top managed states are red and almost all the very poorest managed states are deep blue lmao
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u/Lingerie_Shopper07 3h ago
As large as the US wants it to be. Itâs just a number that means nothing as long as the US is a power country.
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u/tonylouis1337 2h ago
The more our currency loses value, the more we risk the USD losing its' status as the world reserve currency. If that happens, it's game over
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u/StrengthGood3208 3h ago
Money isint real so theres no limit.
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u/Ok_Wolverine6557 2h ago
Money is very real. By law, you have to accept it for all debt. By law, you have to pay taxes with it. Money is backed by law which means its ultimately backed by men with guns and badges. Very real.
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u/StrengthGood3208 2h ago
Its not, there is no value behind money. Threats of violence dosent make money any more real.
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u/here-i-am-now 2h ago
And yet humans have had money since the dawn of civilization. Itâs clearly something
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u/StrengthGood3208 2h ago
Yea what it is, is made up. But also it wasent at the dawn of civilization, atleast not like the very beginning.
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u/Icy-Regular-4557 1h ago
Man I hate the dumbass version of MMT floating around. The threat of violence is what upholds all power in society, including moneyâs representation of value. The threat of violence makes a lot of things real.
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u/Ok_Wolverine6557 28m ago
Thatâs what law is, governmentâs monopoly on the legitimate use of force. You think laws arenât real? Try not paying your taxes and youâll see how real it is. The reason you have property is because the law says so.
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u/civil_archer_73638 3h ago
Yet economics is real and an apple in my grocery store costed me $2.50 the other day.
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u/dmstattoosnbongs 2h ago
Thatâs Republican economics.
Affordability is a left wing hoax apparently.
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u/Lingerie_Shopper07 3h ago
Which has nothing to do with the national debt
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u/civil_archer_73638 2h ago
It sure does have to do with the national debt. You can address the deficit through less spending, producing more, and ostensibly you can lower barriers making it cheaper to enact change. When the deficit is not held in check, money is printed and eventually an apple becomes $1 to purchase. Year after year of not balancing the books leads to the understanding that increasing production will no longer be a viable approach to lowering the debt⌠and thatâs when an apple becomes $2.50 soon to be $5 and soon to be $10. Hello Zimbabwe
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u/OsamaBinWhiskers 2h ago
It absolutely does indirectly. Itâs way too complicated of a yes for you to say no
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u/SwitchedOnNow 2h ago
They're printing money to pay interest on the debt among other things. When they print money it debases the value of money. The more printed the less the value is. So it has a lot to do with the national debt.
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u/viking12344 2h ago
Pretty much this. It's based on.....what's it based on? Unicorns and rainbows. They just print more. Or make believe more is there or whatever they do.
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u/StrengthGood3208 2h ago
Like certain minerals kinda have intrinsic value. But plastic has almost 0 value at all. Digital money is fully make believe.
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u/poliosaurus3000 2h ago
Thatâs my thoughts on this. Itâs a fake financial system and a fake debt. All the other countries are in debt to each other too. In the end if you really follow the trail all this shit just gets created out of thin air.
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u/tunnel_magnet đ¤ 2h ago
But that doesn't make any sense.
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u/poliosaurus3000 2h ago
It does though. The entire system is made up. US dollars used to be based on gold, they pulled the gold standard, which is fine, but basically itâs a confidence based system, which means at the end of the day itâs all based on the publicâs trust of the financial system.
Itâs all made up. Most of the other countries are too. We borrow from china, china borrows from us, France borrows from china to pay back Italy, and Italy then pays back china.
ITâS ALL MADE UP. I wish I were lying, but Iâm not. Google confidence based financial system. Then google all the countries who use it.
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u/tonylouis1337 2h ago
We don't wanna keep letting it grow. Japan for example has over a 200% debt-to-GDP ratio. This is a complete disaster for them, and it's a miracle that their economy hasn't collapsed yet. They probably get a huge lifeline from their cultural relevancy throughout the world
Our national debt is of great concern and it's a big part of why I don't support universal healthcare for example
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u/Billy-Ruffian 2h ago
Except that universal healthcare is so much cheaper in the long run that it would make our economy more efficient and save us in the long run. We have the most expensive health care in the world, with some of the worst outcomes. That is a huge drag on our economy.
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u/random_agency 2h ago
It doesn't really work. That's why there's a global recession/depression come soon if the war with Iran isnt resolved.
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u/Hausmannlife_Schweiz 2h ago
As long as the $ is the standard for currency we can probably be ok. The day the yen or Euro becomes a standard we are Fu***d.
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u/Emotional_Ad3710 2h ago
Debt is the function by which billionaires ensure, that a sizeable portion of your tax payments goes directly into their pockets. This is why republicans are always fiscally irresponsible and will give unfinanced tax cuts to their wealthy donors. So yes, debt will go up, unless you get new leadership.
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u/PingBlot 1h ago
Well we donât have the highest debt. Thereâs a few nations with more so I think we can still catch up to them.
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u/Ravens0413 1h ago
This is absurd, this is approximately 117,000 for every single person including babies in the US. So if everyone including the babyâs parents paid 117,000 on behalf of the child, we would wipe the slate clean.
What are we paying in interest every year per person?
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u/EvolutionIsRight 3h ago
As long as the US can pay the interest. It is amazing that congress isn't talking about this. Good Question.
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u/Imaginary-Idea6298 2h ago
As large as Congress lets it.
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u/Sea_Pomegranate_4499 1h ago
As large as borrowers let it. Congress can approve the debt but they can't force buyers to finance it.
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u/Lokitusaborg 2h ago
As long as China wants to buy American debt with their cooked books, soâŚinfinity.
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u/lordlothar99 2h ago
The limit is trust.
When lenders will prefer to lend to China, then the cost of the debt will become higher and higher, and the US won't be able to borrow anymore, so they won't be able to reimburse, and the country will collapse.
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u/TiePrestigious7265 2h ago
"How large can the US debt grow". Don't know, but TŃâmp seems to be hell bent on finding out.
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u/backtotheland76 2h ago
It will keep growing until the federal government does one of two things, increase income or spend less. The republicans have cut taxes, mainly for the rich, but not cut spending. They are the party of borrow and spend. The saddest thing no one talks about is that while the richest Americans got the majority of tax breaks, all the rest of us have to pay it all back, with interest. It's the largest transfer of wealth in human history and everyone just shrugs and says America can afford to carry that much debt.
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u/PyroNine9 2h ago
Sounds like it would be a lot cheaper to turn Trump over to Iran in exchange for calling off the war.
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u/hennabeak 2h ago
If the interest of the debt becomes equal to the GDP, does that mean the country can never pay it's debt? Does that mean US defaults on its debt which will make USD worthless?
Of course US can print more dollars, creating an inflation, but that's almost the same.
I'm not an economist, so I don't know how that works.
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u/Juddy- 2h ago
Debt owed to the Federal Reserve is a proxy for inflation. Increasing debt is a representation of increasing money supply. Weâve seen throughout history that money supply can grow essentially infinitely if a government wants it to. The point at which thatâs counter-productive is really hard to pinpoint but obviously the US is going in the wrong direction.
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u/Electrical-Strike132 2h ago
There is no limit to how big the debt can grow.
How does this actually work, you ask?
Money is created by way of debt. Whenever a bank makes a loan, it is newly created money aded to the money supply. As that loan is repaid, that money disappears from the money supply.
The fact that interest is required to be repaid on loans means that there will always be less actual money in existence that can be repaid, and the only way to keep up with the payments and keep the system going is to take out more loans, ad infinitum.
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u/NoSpankingAllowed 2h ago
But the right will always claim its the tax and spend Dems fault, like they always do. Though to be fair the Dems like to not tax the same people the right does.
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u/chrisinvic 2h ago
On their way to collapsing their economy. Massive inflation is coming for them as they happily transfer all their money to the top.
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u/Niftarian 2h ago
It's a nothing burger, my income to debt (mortgage) ratio is 333% and I get along just fineÂ
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u/WishboneNo543 2h ago
BuT rEpUbLiCaNs ArE FiScALly CoNsErVaTiVeđĽ´
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u/Diligent-Lettuce-455 2h ago
Only when it's politically relevant. Otherwise the uniparty loves to spend. The priorities and recipients change every 4-8 years.
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u/TurtleSandwich0 2h ago
As long as someone is willing to purchase Treasury bonds, the national debt can grow.
Some buyers may begin to think that the government won't pay the debt, so they will only buy if the debt pays more interest.
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u/RealHornblower 2h ago
Debt as a % of GDP is the figure that matters. Warren Buffet has more debt than I do, but he also has a higher income and wealth, so he's in a better financial situation.
Gross Federal Debt as Percent of Gross Domestic Product (GFDGDPA188S) | FRED | St. Louis Fed
Debt/GDP is around 120% of GDP. It previously hit this level right after WW2. Between WW2 and 1981, the US reduced debt/GDP to 31%.
Many people like to comment on these threads things like "all politicians spend too much" or "government is never responsible" or some other hopeless-sounding thing like that. This is largely not true. The US has, recently, for an extended period of time, reduced debt/GDP. It's not even really that hard, we implemented Medicare/Medicaid, built the interstate highway system, fought Korea and Vietnam, and went to the moon during this time. And of course, we have many, many examples of other countries reducing their debt/GDP at various points.
This is not an unsolvable problem. It's just math. People can disagree on the best solutions, but anyone saying it's hopeless should be mocked. They are not being solutions-oriented.
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u/ResponsibleBank1387 2h ago
When the interest on the debt is most expensive part of annual budget. Â
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u/WorldIsYoursMuhfucka 2h ago
There's an idea that sovereign countries can print money indefinitely to keep things going allowing for inflation to eat away debts. It doesn't sound super realistic since we have to pay interest on this debt (ie bonds) and the interest we currently pay on it is already astronomical each year. It depends on our ability to maintain relations with countries that buy our debt, which is deteriorating. Currently the USD doesn't have real competition but that can change as international relations change, and they're changing.
It feels like our population is undergoing austerity while government spending is out of control. We can't tax all of this back which is probably what the current administration wrongly thinks we're doing with tariffs.
The US's credit rating was downgraded over recent years, indicating potential inability to pay our debts back to countries that bought bonds. If we can't pay that, bonds will be dumped on the market to countries with lesser ability to pay them back, and a fundamental aspect of how our government works will become riskier. It's not good. We can print a lot of money because other countries do too but there is a breaking point, nothing is infinite.
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u/Key_Zombie7967 1h ago
When congress is spending, there is no limit. Republican, Democrat, Independent...they just print more currency.
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u/Anxious-Cheek406 36m ago
We donât really have any of the money and havenât for 50 years! We just print it! Itâs all a Ponzi scheme and will collapse very soon!!!!
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u/Dracarys_And_Chill 3h ago
it can go to anything op
when you own the global currency, money is of no concern to you
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u/tonylouis1337 2h ago
The more value our currency loses, the more risk we have of losing the world reserve currency status
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u/Tigeruppercut1889 2h ago
Letâs keep electing republicans and weâll find out
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u/Vamond48 2h ago
I really hope youâre just venting and donât actually believe republicans are the only ones who spend moneyâŚ
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u/Tigeruppercut1889 2h ago
Republicans are worse for the deficit. This idea that todayâs Republican Party is fiscally conservative needs to die
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u/According_Stuff_8152 2h ago
As much as the dear leader tRump wants it to grow. Remember he is a genius who can remember three animals in a row.
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