The bottom line is that the country cannot spend more than it makes in tax income indefinitely and anyone who says otherwise is delusional. Unfortunately, I think the reckoning for all this debt will come sooner than many people expect.

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pedrocr 4 hours ago | parent | next [-]

You can deficit spend indefinitely as long as your deficit percentage is below your economic growth percentage. That keeps the total debt as percentage of the economy stable and the amount of tax you need to service the debt a stable percentage of your total tax.

If you do that it can be a good idea. It's a way to accelerate investment. It can also be a good idea to modulate your deficit in a cycle counter to the economy so that it acts as a stabilizer.

The US has been failing on all these. The deficits are too large and are high both in good and bad times. Eventually that breaks things.

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mminer237 2 hours ago | parent [-]

Infinite growth is impossible, therefore the deficit has to be paid down some day.

	▲	pedrocr 24 minutes ago \| parent [-]
		Infinite growth is possible as long as your economy trades things that are not physically constrained. Art can grow in value over time without hitting any constraints. And even if your economy doesn't grow in real terms, to service debt all you need is for the economy to grow in nominal terms, to have inflation. And even if your economy stagnates completely and has zero inflation you just need to bring your deficit to zero to maintain the debt level. Every year you can just pay the interest on the debt from taxes and your debt as percentage of the economy stays stable without ever paying down the debt.

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rich_sasha 4 hours ago | parent | prev | next [-]

Sort of yes and no. I don’t think indefinite spending was ever on the cards.

But if other countries tried to maintain the levels of US deficit / debt, they were given far less lenience from investors, in pressure / yields. This was because US was seen as, on the whole, fiscally responsible, very productive, and safer from shocks - to the point that when the US mortgage crisis exploded, the safe haven for assets was… the US.

As these assumptions are challenged, the US is waking up to what the European old economies experienced following 2008. Increasingly yields, increasing costs of borrowing etc.

If you’re reliably printing good GDP growth, higher level of debt may be good as it gives you more leverage, and drives more growth in turn. But leverage is a multiplier and it isn’t free, so if the engine sputters, you might find yourself falling out of the car at a greater speed…

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mono442 4 hours ago | parent [-]

A debt crisis like in eurozone countries in 2008 is very unlikely to happen in the US. For it to happen, it would require the fed working against the us government.

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rich_sasha 2 hours ago | parent [-]

Well, the US clearly has far, far more rope than Greece or Italy. Question is, is that a buffer, or a perfect noose in the making.

The Fed seems already constrained by the administration to not raise rates. Yields went up anyway. US primary deficit is huge and so debt to GDP is accelerating from different angles - interest, increased spending, increased yield demand based off uncontrolled inflation expectations etc.

In fact I suspect that the mega-pivot to AI is an attempt to solve the problem by massively inflating GDP, so that the debt doesn’t matter - ie radically grow the economy. It remains to be seen if it pays off and solves US’s problems.

At the end of the day, the US cannot escape from the forces that drowned Greece - inflation, investor confidence, debt spiral. It’s totally avoidable, but the US seems determined to race full speed ahead at it. Let’s see if Trump can play chicken with economics.

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pjc50 an hour ago | parent [-]

It's basically the Liz Truss situation, except the UK could actually remove her after just one budget because the Conservative party weren't fully on board with her level of brainworms. Whereas the US's two legislative houses are 100% supportive of this.

	▲	disgruntledphd2 44 minutes ago \| parent [-]
		> Whereas the US's two legislative houses are 100% supportive of this. I think that it's more likely that many of them just like their jobs, and Trump has a history of orchestrating primary challenges against people who disagree with them. Now, one could additionally argue that this is only possible because of their frankly insane gerrymandering, and one would be correct, so maybe it is ultimately their fault.

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stephen_g 3 hours ago | parent | prev | next [-]

That’s not true, because it would have to mean that money is created by the private sector (or just magically springs into existence somewhere) and that taxing it is the only way for the Government to get it.

Money is a created thing, a creature of the state. We maintain certain fictions about it (like “tax to spend”, allowing the market to set bond yields most of the time and keeping track of the outstanding bonds as “government debt”) because people are scared that Governments wouldn’t be controlled enough to manage money creation if they overtly used the powers they have to issue currency… But effectively they still kind of do it…

And while it’s not perfect it’s actually far more stable than attempts at fixed exchange rates and pegging currency to commodities like gold (which always fails eventually, because it doesn’t stand to reason that the amount of gold or any other commodity in a country would correspond to how much money the economy needs. You can set the exchange rate but it always drifts, so those periods tended to swing between big deflation and then inflation, with panics, recessions, and financial crises every few years)

	▲	digitaltrees an hour ago \| parent [-]
		Most money is created by the private sector. Thats was fractional reserve banking is, creating money.

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pjc50 4 hours ago | parent | prev | next [-]

The reckoning will be put on Democrats. It's quite hard to do this while the Republicans hold all the power, but as soon as it flips the media will care again.

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dgellow 4 hours ago | parent | prev [-]

I think countries can, but there is a limit to how much debt you can have. It’s fine and even likely better for countries to have some deficit, but not $40T while also starting a war with Iran and imposing random tariffs that destabilize the world economy (+ attacking your allies, and all the other things Trump has done over the past decade, including adding an insane amount to the deficit)

	▲	Krutonium 4 hours ago \| parent [-]
		For anyone not aware just how much: A quarter of it. A quarter of all US debt happened under Trump.