03-02-2021, 01:26 PM
(03-02-2021, 12:55 PM)jalanlong Wrote:(03-02-2021, 09:57 AM)Otter Wrote:(03-02-2021, 07:06 AM)fenders53 Wrote: We aren't paying this debt down. We do not have the political will to come close to balanced budget. Inflation and growth are our current options. Better have some growth in our ports too.
Growth results in a paying down of the debt through increased tax receipts on the added economic activity.
I think long term, inflation will take care of the bulk of debt reduction. There are some long-term demographic issues (aging population, population stagnation/decline) that aren't really compatible with traditional methods of growth. In the absence of a growing working-age population, other factors have to pick up the slack (like productivity gains). Maybe AI and other technological advances will be sufficient to sustain growth despite demographics, but that remains to be seen.
In order to inflate the debt away, wouldn't the rate of inflation have to outpace the growth of debt? In the last 30 years the debt has gone up 800%.
No serious economists recommend eliminating the entire federal debt. Issuance of treasuries (federal debt instruments) are vital to the functioning of the modern financial system and various sectors of the economy. Sudden elimination of federal debt would probably have serious negative consequences. The only time we've done it in our history (1835), a massive depression happened afterwards, and that was well before huge portions of the global economy were tied to America's sovereign debt issuance.
Keeping the Debt/GDP level manageable, so that interest rates can eventually (long-term horizon) rise back to more normal historical levels without destroying the ability of government to function would be the likely goal.