What will happen to the U.S., If we can't pay off the national debt ?

Question

If a person can't pay his bills, they end up on the street, but what happens when a nation can't pay its bills?

I have heard of some horror stories of when Russia went under: Some had to sell everything they had, including their bodies, just to buy food.

"Even if you've escaped the recent housing and credit crunches and are coping with rising fuel prices, you may still be headed for economic misery, along with the rest of the country. ..."

U.S. debt: $30,000 per American
http://www.usatoday.com/news/washington/2007-12-03-debt_N.htm?csp=34

Answer 1

depression

Answer 2

The answer is NOTHING and the U.S. never will literally pay off its national debt -- it would be fairly stupid and pretty undesirable to do so. We'll almost certainly be carrying our current debt 100 years from now, and as long as future politicians don't let things get TOO out of hand (they are not now), there'll be no real harm.

That's leaving aside the fact that 45% of the national debt is actually in the form of government trust fund assets, such as the social security trust fund. You heard of it? That's part of the national debt. So in addition to the $30,000 debt, at the same time each American owns a $13,500 asset which exactly cancels out $13,500 of the debt.

Interest payments are light years from really straining our resources (most is paid to Americans anyway, and the government taxes those very same interest payments!); the national debt is growing more slowly than the economy; and the amount of debt on which we actually pay cash interest is only a fraction of the total. (This means our national income is growing faster than our national debt).

The U.S. government owing a debt priced in U.S. dollars that the U.S. government controls, makes for a profoundly different situation than an individual owing debt, or from a sick, underdeveloped, market-ignorant, nearly-collapsing country like Russia of 1997 owing debts. Put it this way, the government can ALWAYS meet its obligations priced in dollars, even if it has to resort to certain undesirable fiscal tricks.

Bottom line is that today's debt is no big deal. The problem for this century is of future fiscal policy, because we've instituted entitlement programs with social security and Medicare that are simply too generous and expensive as the demographics change. And we WILL change those policies when we absolutely have too, hopefully a bit sooner.

Answer 3

As long as the debt is not too big and we can pay the interest nothing happens except our taxes are a littler higher. We owed much more as a fraction of GDP after WWII. The problem is, we keep increasing the size of the debt so it may become a real problem in the future.

Answer 4

economic depression like in Russia in late 1990's or in US in late 1920's.

It is not very likely to happen since a lot of US debt is held by foreign countries, and they are likely to pitch in to help US.