Debunking national debt: What everyone should know
Our Debt, Ourselves
By ROBERT M. SOLOW, NYT
LEXINGTON, Mass.
THE significance of America’s national debt is a serious question, but you would not know this from the current political rhetoric, which consists mostly of vague apocalyptic warnings. I want to present a calmer view, by emphasizing six facts about the debt that many Americans may not be aware of.
Roughly half of outstanding debt owed to the public, now $11.7 trillion, is owned by foreigners. This part of the debt is a direct burden on ourselves and future generations. Foreigners are entitled to receive interest and principal and can use those dollars to acquire goods and services produced here. If our government had used borrowed money to improve infrastructure or to improve the skills of workers, the resulting extra production would have made repayment easier. Instead, over the last decade, it used the money for wars and tax cuts.
The Treasury owes dollars, America’s own currency (unlike Greece or Italy, whose debt is denominated in euros). So the Treasury can always make payments when due — unless it is prevented from doing so by political blackmail over the statutory debt limit, which is now due to be reached in May. Notwithstanding the unprecedented credit-rating downgrade by Standard & Poor’s in 2011, no foreign lenders realistically expect us to default. If they did, they would be insisting on higher interest rates, which they aren’t. Of course, if we were stupid enough to default even once, the cost of borrowing would go much higher, for a long time.
(More here.)
LEXINGTON, Mass.
THE significance of America’s national debt is a serious question, but you would not know this from the current political rhetoric, which consists mostly of vague apocalyptic warnings. I want to present a calmer view, by emphasizing six facts about the debt that many Americans may not be aware of.
Roughly half of outstanding debt owed to the public, now $11.7 trillion, is owned by foreigners. This part of the debt is a direct burden on ourselves and future generations. Foreigners are entitled to receive interest and principal and can use those dollars to acquire goods and services produced here. If our government had used borrowed money to improve infrastructure or to improve the skills of workers, the resulting extra production would have made repayment easier. Instead, over the last decade, it used the money for wars and tax cuts.
The Treasury owes dollars, America’s own currency (unlike Greece or Italy, whose debt is denominated in euros). So the Treasury can always make payments when due — unless it is prevented from doing so by political blackmail over the statutory debt limit, which is now due to be reached in May. Notwithstanding the unprecedented credit-rating downgrade by Standard & Poor’s in 2011, no foreign lenders realistically expect us to default. If they did, they would be insisting on higher interest rates, which they aren’t. Of course, if we were stupid enough to default even once, the cost of borrowing would go much higher, for a long time.
(More here.)
Powered by Blogger
0 Comments:
Post a Comment
<< Home