Thank you for writing this informative story!
“Governments are addicted to eye-watering debt, never repaid. My firm belief that this is disastrous was wrong, so what changed my mind?”
I, too, like the Founding Fathers, have always believed that national debt should be a temporary status reserved mainly for times of war. My opinion has been reinforced when countries that failed to manage their debt experienced massive inflation destroying the value of the accumulated wealth of its citizens. The U.S. experienced a similar situation after the Revolutionary War when states paid their debts to the Union by printing money. Until now, I have not given much thought to the control of debt in the U.S.
What provisions are there in the U.S. to prevent a situation from occurring similar to what’s been going on in Puerto Rico? Due to decades of inefficient governing and debt management Puerto Rico eventually defaulted on its loan payments. The result is that retirees are not receiving their specified government pensions, government funded education and medical facilities are being closed, and social programs are being drastically curtailed.
“The United States manages its debts in an interesting way too. Just over a quarter of its debt (26.5% or US$5.8 trillion) is owed to arms of Federal Government. Social Security, for example, owns US$2.9 trillion of non-traded Treasury Securities because of a previous tax revenue surplus. The surplus by law had to be re-invested in Treasury Securities. The US Government is paying itself interest.”
According to a recent report 36.8% ($8.1 trillion) of the U.S. debt is owned by the Federal Government and Federal Reserve. However, 28.5% ($6.3 trillion) is owned by foreign countries — one third of that by China and Japan. If the oil countries should decide to accept the Chinese yuan for payment in addition to the US dollar, China could dump it’s $1.1 trillion of US debt held and have a significant impact on the value of the dollar.
Another reason I oppose deficit spending is that it is directly related to growth of the federal government. I am aware of only one efficient U.S. federal government program — the Thrift Savings Plan for civil service employees and retirees and members of the uniformed services. Every other government organization is more interested in growth to justify promotion of supervisors and managers instead of frugally spending the taxpayers’ money.
