1. Not finding help here? Sign up for a free 30min tutor trial with Chegg Tutors
    Dismiss Notice
Dismiss Notice
Join Physics Forums Today!
The friendliest, high quality science and math community on the planet! Everyone who loves science is here!

Why is America in debt and how can we fix it?

  1. May 6, 2015 #1
    I've been researching and I am somewhat intrigued by the reasons that I have found. But in all honesty I have little to no idea as to why we are in such a debt. I mean most people would say "Cut the spending" but from what many people tell me, you keep your economy stable by continuing with deficit spending... I don't full grasp the concept but I was wondering if anyone could give me insight on why it's hard to get out of our deficit. What type of actions can our government take to improve our economy? Is deficit spending truly a way to keep a stable economy for the most part?
     
  2. jcsd
  3. May 6, 2015 #2

    phinds

    User Avatar
    Gold Member
    2016 Award

    If you personally were in debt, do you think you could just spend more and thereby get out of debt?
     
  4. May 6, 2015 #3

    DrClaude

    User Avatar

    Staff: Mentor

    Personal economy is not the same as the economy of a country.
     
  5. May 6, 2015 #4

    phinds

    User Avatar
    Gold Member
    2016 Award

    Yes, I agree, and I would even go farther and say that an individual might be able to "spend their way out of debt" if the spending was investment in a business that brought in profits greater than it cost to build. Sadly, government doesn't work that way.
     
  6. May 6, 2015 #5

    russ_watters

    User Avatar

    Staff: Mentor

    This is a big topic and I'm not sure what answer you need/want, so here's my take:

    Ultimately, it is simply a choice: the government chooses to be in debt. Why? Well, there are some legitimate economic reasons for running a small debt, but we're way beyond that. What it really comes down to is that it isn't fundamentally different from splurging and running-up credit card debt: It feels like free spending if you don't have to pay for it right away. And for politicians, that's great: you can give people the services they want without charging them the taxes it costs to pay for them. So the people are happier with politicians' performance and re-elect them.

    That's for basic government debt - the every-day running of the government. There is actually a bigger problem of debt that people pretend doesn't exist. It's the entitlements of Social Security and Medicare, where government collects money today that it intends to distribute back to the same people when they get older. But instead of saving/investing that money, the government just spends it on other things (mostly the people who didn't pay much or anything in to the programs, but get substantial benefits). Phase-in periods allowed the programs to build-up a surplus, whereas now they are cash-flow negative -- but they've always been under-funded vs their commitments. Even still, that debt is even better for politicians than basic budget debt because the government doesn't have to pay it back for decades and by then people have forgotten how much it borrowed and are locked-in anyway!
     
    Last edited: May 6, 2015
  7. May 6, 2015 #6

    Vanadium 50

    User Avatar
    Staff Emeritus
    Science Advisor
    Education Advisor

    When a government (or a person) has a deficit, they have three ways to get out of it - increase revenues (i.e. taxes), decrease spending, or borrow to make up the difference. In recent years, the most politically acceptable of the three has been to borrow. This works until lenders no longer want to loan you any more money.
     
  8. May 6, 2015 #7

    phinds

    User Avatar
    Gold Member
    2016 Award

    So you don't agree that people (but not governments) have the option I expressed in post #4?
     
  9. May 6, 2015 #8

    Choppy

    User Avatar
    Science Advisor
    Education Advisor

    Hmm...
    1. First post.
    2. Politically loaded question.
    3. Involves questions that are (a) answered through part of any high school class covering civics and (b) can easily be looked up on line.
    4. The questions are bound to invoke strong opinions.

    I give this thread a trollness factor of 7.5/10.
     
  10. May 7, 2015 #9

    Vanadium 50

    User Avatar
    Staff Emeritus
    Science Advisor
    Education Advisor

    I would say that it is an example of a plan to increase revenue.
     
  11. May 7, 2015 #10

    jtbell

    User Avatar

    Staff: Mentor

    A sovereign government has more options: issue more money, and/or devalue the currency.
     
  12. May 7, 2015 #11

    PeroK

    User Avatar
    Science Advisor
    Homework Helper
    Gold Member

    One example where a government invests to ensure future revenue is education.

    Another example is offering grants to start-up companies.

    How successful these investments turn out to be is another matter. But, there is at least a possibility that such investments are financially successful in the long run.

    This debate is raging in the UK - especially as there is a general election today. It seems to me, however, that very little government spending (apart, of course, from education) is investment. And, the vast majority, is patently not investment.
     
  13. May 7, 2015 #12

    phinds

    User Avatar
    Gold Member
    2016 Award

    Yes, and the absolute best one I can think of the the Eisenhower Interstate System. Even though Ike did it for military reasons, few people, especially these days when it has long since been fully taken for granted, realize just how overwhelmingly important it was to the massive growth of the USA in the decades following WWII.

    Unfortunately, since then government has done what government does best which is blow the increased income on things that get politician elected.
     
  14. May 7, 2015 #13

    phinds

    User Avatar
    Gold Member
    2016 Award

    I see your point but I think you are nitpicking. That's my job here :smile:
     
  15. May 7, 2015 #14

    Vanadium 50

    User Avatar
    Staff Emeritus
    Science Advisor
    Education Advisor

    Yes, they have this option. However, it acts like a tax on wealth, and so has the same consequences.

    I see also that people seem to think I am arguing that all borrowing is bad. That's nonsense. There are good reasons for people to borrow money, and there are good reasons for governments to borrow money. That said, I think a budget, personal or governmental, that depends on ever-increasing borrowing year after year is eventually going to cause problems. In terms of a business, borrowing money for investments is usually a better idea than borrowing money for operations.
     
  16. May 7, 2015 #15

    russ_watters

    User Avatar

    Staff: Mentor

    Are you asking if governments and/or people can "spend their way out of debt"? In principle, either can. But that's a somewhat different question because it is about the long term accumulation of debt, not the short term decision of what to do with a deficit. So that is still option 3: borrow to make up the difference.

    Now, if that causes growth that later reduces debt, we can call that 3b. 3a would just be accumulating debt over time. While in the real government, it is tough to prove what individual actions do (and you can have both at the same time), over most the long term, the balance is decidedly toward 3a: we're accumulating more and more debt, not spending our way out of it.
     
  17. May 7, 2015 #16

    phinds

    User Avatar
    Gold Member
    2016 Award

    Agreed, and that is in fact the POV of my original response to the question.
     
  18. May 7, 2015 #17
    There is an assumption in the thread title that I find interesting. "Why is America in debt and how can we fix it?" This question implies that debt is bad or broken. Is it? Is it preferable to have less debt than more, and why?
     
  19. May 7, 2015 #18

    phinds

    User Avatar
    Gold Member
    2016 Award

    Because (1) someday you HAVE to pay it back and (2) it just keeps getting bigger and bigger and the servicing of the debt gets overwhelming.

    As has already been pointed out in this thread, the catastrophic borrowing that America has done is in the entitlement programs. If things keep going the way they are now, the service on that debt will become more than we can possibly pay.
     
  20. May 7, 2015 #19

    Vanadium 50

    User Avatar
    Staff Emeritus
    Science Advisor
    Education Advisor

    This US currently plays about a quarter of a trillion dollars a year on debt interest. That's money that could go to other areas. That is the entire budget of the State, Education and Labor departments combined. It could fund thirty National Science Foundations or a dozen NASAs.
     
  21. May 7, 2015 #20

    russ_watters

    User Avatar

    Staff: Mentor

    And that's with historically low interest rates.
     
Know someone interested in this topic? Share this thread via Reddit, Google+, Twitter, or Facebook

Have something to add?



Similar Discussions: Why is America in debt and how can we fix it?
Loading...