National Debt

[Kishkumen]

Let's MAGA and take tax rates on highest brackets back to the good ole days of the 1950s. And uncap Social Security wage taxes. And end capital gains classification and classify all income the same for tax purposes.

Agreed.

[canpakes]

Is RFK’s plan to ask Don to pay it down in exchange for his endorsement?

You could be on to something.

If Kamala wins, she should set up a super-ultra-top secret program for the US Gov to discreetly run an outsourced manufacturing operation of ‘FKH’ flags and merch, with all profits going towards paying down the national debt. It might take a couple of years, but we’d have that debt whittled down to manageable size pretty quickly.

[High Spy]

Is RFK’s plan to ask Don to pay it down in exchange for his endorsement?

You could be on to something.

If Kamala wins, she should set up a super-ultra-top secret program for the US Gov to discreetly run an outsourced manufacturing operation of ‘FKH’ flags and merch, with all profits going towards paying down the national debt. It might take a couple of years, but we’d have that debt whittled down to manageable size pretty quickly.

Never ever underestimate the power of merch to save the world.

[Dr. Shades]

No government debt would mean no government bonds held by anyone, so everyone would have to rely on riskier investments—and just make them more cautiously.

Or not invest at all.

That would mean less investment in start-ups and a generally slower economy. A modern government would actually be wise to run up some debt even if it didn’t need extra money, just to put some government bonds out there to help the economy.

How would investment in government bonds equal investment in start-ups? A dollar can either be put into one or the other, not both.

Too much debt could be bad, but so could too little.

Regarding that last half, I fail to see how.

[Gadianton]

How would investment in government bonds equal investment in start-ups? A dollar can either be put into one or the other, not both.

I don't see where PG is saying investment in government bonds matches investment in start-ups. I read him as saying exactly what you are, that you can either invest in one or the other, and as you say, if you're going long on government bonds, then that money can't be used for stocks or venture capital. But it's not just a tradeoff with capital that slows the economy, its a tradeoff with consumption.

Regarding that last half, I fail to see how.

You would need to be convinced of two things in order to accept that too little government debt can be bad. The first thing you'd need to accept is that government should exist at all. Can government do anything better than the private sector? If not, then it follows trivially that there should never be government debt because there should be no government. The second thing you'd need to accept is that debt should exist at all. Has anyone anywhere at any time justifiably gone into debt? If not, then it follows trivially that there should never be government debt because there should be no debt. However, if you believe that there should exist government and that debt is ever justifiable, then it seems to follow trivially that government debt could also be justifiable.

A private company goes into debt if its revenues are inadequate to pay for new ventures. A government goes into debt if its taxes are inadequate to pay for new ventures. The question is if the new ventures are cost justified. For instance, a city with exploding growth may need to start now with some long-term projects upgrading roads, sewer systems, trash collection and so on, in order to facilitate the larger population. Estimates show that in 20 years, taxes from increased resident base and new businesses will easily pay for all of these upgrades. An alternative model is to not count chickens before they hatch and first collect the requisite tax money and then build out the new infrastructure. Until then, new residents can let their garbage pile up for a few years and crap in their back yards.

[Physics Guy]

If you have enough of your capital in Treasury bills, which don’t yield much interest but are unlikely to lose value, then you can afford to risk some of the rest of your money in a startup that might be the Next Big Thing or might tank. If you couldn’t buy the T-bills, because Congress paid off the national debt and didn’t incur any more, you’d have to pass on the startup and stick with General Motors, passing up all chance of a big win in order to be sure you won’t lose it all. And then since nobody else has access to T-bills, either, no risky startups get funded and the world carries on with 1962 Chevies.

[Dr. Shades]

However, if you believe that there should exist government and that debt is ever justifiable, then it seems to follow trivially that government debt could also be justifiable.

Just because it is justifiable doesn't mean it is "good."

A private company goes into debt if its revenues are inadequate to pay for new ventures. A government goes into debt if its taxes are inadequate to pay for new ventures.

True. But again, just because debt is sometimes justifiable doesn't mean that, as Physics Guy says, "too little debt is bad." No debt is always preferable to debt, all other things being equal, even if debt is justified.

If you have enough of your capital in Treasury bills, which don’t yield much interest but are unlikely to lose value, then you can afford to risk some of the rest of your money in a startup that might be the Next Big Thing or might tank.

You are free to risk some of your money in a start up even if you don't have any treasury bills.

If you couldn’t buy the T-bills, because Congress paid off the national debt and didn’t incur any more, you’d have to pass on the startup and stick with General Motors, passing up all chance of a big win in order to be sure you won’t lose it all.

No, you could just leave it in the bank.

And then since nobody else has access to T-bills, either, no risky startups get funded and the world carries on with 1962 Chevies.

Again, you can fund a risky startup without a treasury bill. Just leave money you aren't interested in risking in the bank.

[Gadianton]

True. But again, just because debt is sometimes justifiable doesn't mean that, as Physics Guy says, "too little debt is bad." No debt is always preferable to debt, all other things being equal, even if debt is justified.

How would that idea ever help you make a decision in life? Give me an example where all other factors are "equal", and a decision was made to stay out of debt rather than take on debt, and this was obviously the right decision.

[canpakes]

A private company goes into debt if its revenues are inadequate to pay for new ventures. A government goes into debt if its taxes are inadequate to pay for new ventures.

True. But again, just because debt is sometimes justifiable doesn't mean that, as Physics Guy says, "too little debt is bad." No debt is always preferable to debt, all other things being equal, even if debt is justified.

:: the 45% of the adult US population that possesses some kind of college degree enters the chat ::

[Physics Guy]

Everyone is free to risk all their money on anything, but it’s unwise to do that, so they don’t. Risky startups only get funded if people have a way to keep some money safe as a nestegg.

Leaving your money in a savings account is not a good alternative to buying T-bills. The interest rate is too low. The current average seems to be under 1%, while the current T-bill offers over 5%. A few banks do offer savings rates nearly that high, but only because they’re trying to compete with Treasury bills.

If the only safe investments have low interest like bank accounts, people need to save more principal, and spend less of their income. That might just sound thrifty and prudent, but if everyone does it, it’s called a depression.