Does U.S. debt matter? | CNBC Explains

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  • Published on:  Thursday, July 26, 2018
  • U.S. government debt stands at more than $21 trillion. Does it matter? CNBC’s Elizabeth Schulze explains.

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  • Source: https://youtu.be/So2OQW6gR6I
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  • JP Delmar

    JP Delmar

     4 days ago

    It doesnt matter because the fed reserve bank can literally print money. This will cause inflation but since all other cuurencies are pegged to the dollar, and the US has a strong economy, this means that the US is exporting inflation as well.

  • Lgge Gee

    Lgge Gee

     7 days ago

    The national debt to China needs to be wiped out. Tell China to suck one because we will NEVER pay it back.

  • catfishunter28

    catfishunter28

     7 days ago

    The difference is you have to pay back a car loan lol

  • Steve Godenich

    Steve Godenich

     14 days ago

    The US population has almost doubled since 1960[1]. The civilian work force[2] has more than doubled since 1960 and the civilian work force participation rate[3] has increased, becoming relatively stable around 62-63%. Unemployment[4] is leveling off, but median household incomes[5] are on a relatively stagnant trend. The lack of wage growth to keep up with inflation in housing costs[6,7], college cost of attendance[8] and transportation[9] are major drivers of consumer debt for the current working generation. Global competition in productivity for real goods & services is one likely cause for slowing wage growth and increasing debt/gdp[10]. The need for increased automation[11] in the US to increase productivity may likely drive down demand for lower skilled jobs in the not so distant future.

    [1] Population, Total for United States | FRED
    [2] Civilian Labor Force | FRED
    [3] Civilian Labor Force Participation Rate | FRED
    [4] U6 Unemployment Rate | Macrotrends
    [5] Real Median Household Income in the United States | FRED
    [6] Median Sales Price for New Houses Sold in the United States | FRED
    [7] Rent price history from 2000 through 2019 | Inflation Calculator
    [8] Tuition and Fees and Room and Board over Time | College Board
    [9] Consumer Price Index for All Urban Consumers: New vehicles | FRED
    [10] Total Public Debt as Percent of Gross Domestic Product | FRED
    [11] Why Play Leap Frog? (1949) | Youtube


    The financialization of our economy* is a problem for savers. To lower debt/gdp, consider transitioning to a decentralized form of Edgar Feige's 0.3% APT tax[1,2] on dollar liquidity flows[3,4], where tax proceeds are apportioned to local governments and bubble up to State and Federal levels after local fiscal issues are addressed. Besides saving $800 billion/year, it raises net profits, raises net wages, lowers prices and unilaterally addresses tax havens[5,6]. It may be viewed as an economic check against excessive State and Federal spending, i.e. the financial sector would raise lending rates for Federal government funding to avoid the risk of APT tax rate hikes on dollar liquidity flows that may result from lower Federal tax revenues (due to excessive price inflation in communities across the country). Higher interest rates would boost ROI for risk-free portfolios in pension funds, 401K's and the entire SS Trust Fund, as well as bring down housing prices for conscientious savers. This tax reform would allow local governments to lower property and education taxes..The overall effect of lowering tax rates is a fiscal incentive to increase CapEx and increase productive business and job creation in our local communities, i.e. 20, 000 municipalities[7]. This tax reform may also be unilaterally adopted by any country for their particular currency.

    * Other People's Money by John Kay (2016)

    [1] Alternative Proposals Reform, May 11 2005 | Video | C-SPAN
    [2] Taxation for the 21ST Century: Automated Payment Transaction (APT) Tax | SSRN
    [3] Intraday Liquidity Flows | FRBNY
    [4] Worldwide Currency Usage & Trends | SWIFT
    [5] The Spider's Web - Britain's Second Empire | Youtube
    [6] [PDF] The Treasure Islands | Nicholas Shaxson
    [7] Number of Municipal Governments & Population Distribution | NLC | 2007

  • noah

    noah

     14 days ago

    it's free. Is dangerous because eventually people will stop buying bonds. Theres only soo much money to be spent on bonds so the government will wake up one day and have to slash the budget in half overnight. Jusy imagine what that will do to the economy. We already spend over 7% on interest. Rediculiuks when that could pay for free national healthcare and our military twice.

  • g

    g

     21 days ago +1

    It is a fallacy to think that increasing taxes will decrease debt. Increasing taxes will lead to increase in govt. spending which will again increase the debt.

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  • huh wut

    huh wut

     21 days ago

    Yup

  • Jay H

    Jay H

     21 days ago +2

    It does not matter until the US dollar is not the currency of choice in international commerce.

  • Mr G

    Mr G

     21 days ago +2

    No because they can just wage war with the debt collector.

  • stenobro

    stenobro

     21 days ago

    Check out Caspian Report's multi-part series on American debt for a more in-depth look.

    https://youtu.be/WWCoDORgs3A

  • Steve Godenich

    Steve Godenich

     21 days ago

    Entitlements[1], like the $1.7 trillion OASDI/Medicare insurances spending[2,3] are funded by the 15.4% FICA and SS Trust Fund. Rates and caps may be adjusted to sustain the fund. Address entitlements like the $2.25 trillion guns[4] & butter[5] spending funded primarily by the federal income tax[6].

    Consider transitioning to a decentralized 0.3% flat tax[7,8] on the $4 quadrillion liquidity flows tax base[9] instead of the 10-37% graduated income tax on a $10 trillion subset of the liquidity flows tax base[10] and average 6% sales tax plus state income taxes[11], 10% capital gains tax, excise taxes, subsidies and tariffs. Apportion these tax revenues to local governments so constituencies, through their locally elected representatives, may deliberate how their tax dollars are spent and regulate funding of appropriations to state and federal governments, as well as reduce property and education taxes. This tax reform encourages growth of local business and jobs. Profits would rise, wages would rise and prices would drop. This tax reform also addresses tax havens[12,13] and saves $800 billion/year in tax processing overhead costs. No one wants their savings or investments diluted or to incur rising tax rates. As an economic check & balance, excessive monetary inflation, e.g. QE/ZIRP would call for higher tax rates so local governments would compensate for ensuing price inflation by reserving more tax revenues to address fiscal issues in their local communities, i.e. less funding for state and federal appropriations. Lastly, set up a sinking fund[14] to manage national debt and maintain good standing with primary lenders to Federal debt.

    1, Glossary Term | Entitlement | United States Senate

    2. [PDF]Fast Facts and Figures About Social Security| SSA | 2018
    3. Medicare Financial Status: In Brief | CRS |2018
    4, Making Sense of $1.25 Trillion National Security State Budget| POGO
    5, CRS Report: Welfare Spending The Largest Item In The Federal Budget | Sessions
    6. The Income Tax | Seligman | 1911
    7. Alternative Proposals Reform, May 11 2005 | Video | C-SPAN (2nd 5-minute speaker)
    8. Taxation for the 21ST Century: The Automated Payment Transaction (APT) Tax | SSRN
    9. Intraday Liquidity Flows | FRBNY
    10. Summary of the Latest Federal Income Tax Data, 2017 Update | Tax Foundation
    11. A List of State Income Tax Rates - The Balance
    12. [PDF] Treasure Islands | Nicholas Shaxson
    13. The Spider's Web - Britain's Second Empire
    14. Sinking Fund | Investopedia

  • Elie Eid

    Elie Eid

     28 days ago +2

    So US senior citizens are responsible for the debt. Not spending like a crazy demon on killing people

  • Jamie Kloer

    Jamie Kloer

     28 days ago +2

    The government is spending to much their is not enough taxes to support it without destroying everything.

  • richard aurre

    richard aurre

     28 days ago

    Does NOT borrow like you & me, it creates money out of thin air, we don't have the FED.