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Is the government debt ($9+trillion) a problem for future generations? Explain.

2007-10-09 15:30:48 · 4 answers · asked by scalizithaproblem 3 in Social Science Economics

4 answers

As was explained in the initial reasoning for most countries' "lets go into perpetual debt", it is not strictly necessary to ever pay off a national debt in full, so long as those who are owed money are given no reason to become dangerously aggressive in their requests for their investments back. As it is, the United States measures its debt based only on those debited funds that are already overdue (our actual debt is actually much larger than this number of course). However, no countries that we owe money too are currently making life very hard for us. An example would be China, to whom the United States owes many billions of dollars more each year. However, as China does recieve some money back, and people in China are still willing to buy Americain bonds (invest in our debt sort of), we have no immediate worries. However, and I believe the answer you are looking for, if our debt grows large enough that a majority of our capital (think spending money for govt. and buisnesses) is comming from outside sources (not currently the case), and these outside sources get angry at us and cut off funding, our economy could be destroyed theoretically.

2007-10-09 15:51:50 · answer #1 · answered by arvencheese 2 · 0 1

It's very interesting question, scalitzit

Increase in budget deficits plus additional unavoidable oil shock without treatment, then it would look like the bust economy of the post VN war era. Young generation would earn less, but payback more to some debts.

The impact is a very hard hit to Medicare system from 2015, and then the related public sector and international aids, and would be counteracted by a drastical change in the dollar's value with vunerable consequence for the global economy.

How to scope with these problems is the next question.

2007-10-11 07:59:34 · answer #2 · answered by toodd 4 · 0 0

This is a complex issue. Interest will be payable in the future on debt carried over from the present which will have to be raised by taxes. It is arguable that present Govt. debt incurred by capital investment in education, highways and bridges, and environmental improvement , to name a few examples, will benefit future taxpayers so they shoud help pay for them. But if debt is incurred on current consumption which offers no tangible benefit in the future, e.g. the war in Iraq, then the future costs of financing it could be seen as an unfair burden on future generations.

2007-10-09 17:29:15 · answer #3 · answered by janniel 6 · 0 0

The key here is that you are asking for future generations, which means, you are not asking is there going to be a problem tomorrow, but are asking in the next 20 years or so. And in that case, yes it is a huge problem for future generations. Here's why.

First, what is insolvency. Insolvency is when an entity (a business, individual, city government, or federal government, etc.) can not pay their bills. How an insolvent entity pays their bills is by borrowing the money.

What is bankruptcy? When an insolvent entity can no longer borrow money to pay their bills, they go into bankruptcy.

Many, many times an individual, a corporation, a city, a country will become insolvent, and eventually, will no longer be able to borrow any money, and will go into bankruptcy. Who bails them out? Tax payers, consumers, states, other countries.

For example, when a country like Mexico and Argentina went bankrupt, who bailed them out: their bond holders by not collecting all that was owed to them, and the US government, when Mexico had financial problems in the early 90s and could not pay their bills, the US gave them $50 billion.

What about when New York city went bankrupt? Taxpayers and bondholders bailed them out.

What about an individual? Consumers, and taxpayers, and whoever loaned them money (meaning they won't get paid the money they loaned out).

So far, the last 50 years, no problem. Why, because everyone who was insolvent and who eventually went bankrupt, there was always a bigger entity there to bail them out.

Now to your question, which is the US government debt problem.

Is the US government insolvent? Yes, they can not pay their monthly bills without borrowing money, They come up short each month by about $60 billion.

Is the US government bankrupt? No, because numerous other countries are willing to loan them money so they can still pay their bills. Also, the Social Security trust fund, loans the government about $200 billion every single year. This is money that is suppose to be there to take care of the Baby Boomers in their retirement, but the boomers are letting the government loot the Social Security trust fund every year, putting the cost on future generations.

Will the US government ever go bankrupt? Yes, eventually.

Well When?

You can actually estimate this to a degree.

Between now and 2015, only 8 years away, if those who loan us money decide not to loan us anymore, we will be bankrupt within 30 days, that is, we will no longer be able to pay our bills. Ever month the US government has billions of bills to pay, and if in any given month they cannot borrow the money necessary to pay their bills, they will go bankrupt very quickly.

Who loans us the most: China, Japan, Russia, and OPEC contries, are on the top of the list.

For example, let's say the price of oil DROPS, and it drops for a couple of years, the OPEC countries will be forced not only to quit loaning us money, but will be forced to sell the US government bonds they do have.

This would mean that not only will the US lose one of their biggest entities that loans us money, but will have to start paying them back for what we have borrowed from them. And if no other country wanted to make up the difference, the US would go bankrupt.

Another thing that will eventually cause us to go bankrupt. Japan, the Japanese loan us billions of dollar every year. Why, because eventually, they will retire, starting in 2010, the boomer generation in Japan will not be loaning us anymore money, but will be wanting the money back that they loaned us to fund their retirement.

What will happen, again, we will lose one of the biggest entities that loans us money, and if no one wants to make up the difference, we will not be able to borrow enough money to pay our bills, and will be forced into bankruptcy.

Finally, granted between now and 2015, there are some things that could cause us to go bankrupt, but we don't know for sure. But, in 2015, it is a for sure thing, that is, we will go bankrupt.

In 2015 the Social Security surpluses will stop, that is, Social Security will no longer be able to loan the government anymore money. Social security will actually have to start cashing in all the bonds they bought from the US government between 1983 and 2015.

The government can not pay their bills now without borrowing money from other countries and the Social Security trust fund, and in 2015 when Social Security is no longer able to loan money, and will start to demand that the government pay money back, will cause the country to go into bankrupcy.

The baby boomers have borrowed and borrowed to make their lives better, only to put the burden of paying all the money back onto future generations.

And, unlike all the other entities that have gone bankrupt, with always a larger entity there to bail them out. Who is going to be big enough to bail out the US government?

The turth? No one will be big enough. The dollar will collapse and future generations will be forced to pay all the money back, which means a huge decrease in their standard of living.

We have been insolvent for over 50 years, and yes, our ability to borrow money to pay our bills can not, and will not be able to go on much longer.

For the next generation, US bankruptcy is as sure as the sun coming up in the morning.

Below is the link to a report put out by one of the US government's cental banks. The title is "Is the United States Bankrupt?" Remember this in not a report done by someone on the internet, it is a report done by a US central banker.

If you do decide to check out the report, the report does offer some solutions that may keep us from going bankrupt. But, after you read it, ask yourself, is the government even beginning to do anything the report suggests? The answer is no, the US government is doing nothing to prevent a future bankrupcy.

2007-10-09 19:14:03 · answer #4 · answered by marketinsider 1 · 0 0

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