A million simulations show US debt is on an unsustainable path

2 comments

1. If you think this is a taxation issue, consider this: If it was magically possible for the government to fully confiscate Google/Alphabet and somehow turn its current market cap into cash and without destroying the stock market and the US economy in the process, that would only cover its interest payment for one year. That is just interest payments of the current debt. It does nothing to reduce the deficit nor the principal of the debt. Nor addresses Social Security and Medicare/Medicaid.

   Next year, Google would be gone, and the government would need to confiscate another trillion dollar business in order to just pay for the interest. After the liquidation of Alphabet/google, there would only be 4 other trillion dollar companies left for the government to fully confiscate, and the interest payments would be even higher due to ongoing deficit and the growing debt that it causes.

   There is no way for the government to tax its way out of this.

   And before you start typing you reply, this is not an argument about the current fairness of our tax system. Maybe corporations should be taxed more, but that is a completely separate discussion. What I am saying here is that the current US debt trajectory is not a revenue issue and no amount of taxation can solve it.

   Interest payments are now the single largest government budget expense. And that will only increase over time.

   A lot of folks think that “the debt does not matter”, but in reality it really does, specially in politics.

   Having interest payments on debt being the single largest government expense is a massive political liability to any administration. It is very hard to explain to the electorate why your largest expense and the one that keeps on growing every year is not social services, or defense spending, or law enforcement, or border control, or free education, but is servicing the debt.

   This is not politically sustainable, no matter that the “the debt does not matter” folks say.

2. Lots of people on Reddit say the debt is not a problem and people shouldn’t be worried. They also refer to Japan that has over 250% over GDP. Basically US can be like Japan and just borrow money.

   Interesting fact:

   US:

   Total household debt in the US is $17.50 trillion as of the fourth quarter of 2023, a $210 billion increase since the third quarter of 2023

   Japan

   The total household debt in Japan amounted to 378.6 trillion yen in 2022 or 2.5 trillion usd