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

  1. May 14, 2015 #41

    phinds

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    It genuinely doesn't matter. We are not going to change our form of government, regardless of any evidence that there is a better system (not that I know of any that are better).

    Not unless there is a radical change in how our "leaders" operate. It's true that if no one tries, nothing gets done, but in today's climate, trying to change the government is nothing more than an exercise in what the military calls "pissing up a rope". You may get yourself wet, but you will have no effect on the rest of the world.
     
  2. May 15, 2015 #42
    The Balance of Payments crisis will be resolved in one of two ways. Either the bill will be paid or it won't.

    If it is paid there are two options.
    The mostly foreigners and largely Chinese could purchase a large amount of real estate in the US. This might leave some folks unhappy, but rumour has it that the US one of the few countries that allows such foreign ownership. It would be quite a shock to see most of America owned by foreigners.

    Or US workers could see their working conditions degrade to resemble Bangladesh, so they would be competitive and remain so for likely thirty years, or as long as it takes to pay it off. This might result in much protest and upheaval.

    Not paying is another option.
    That may be easy with China. There has been a bit of contention in the South China Sea, and as China flexes its military a show-down over Taiwan is likely. As both nations are aggressive, especially the US, this could easily result in default, and possibly even a nuclear exchange.
     
  3. May 15, 2015 #43

    phinds

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    Did you not read post #26 or did you not believe it?
     
  4. May 16, 2015 #44
    Except a few harmful quirks of US political system (voting algorithm that encourages 2 parties polarization and draining money to your district; freedom of speech means right to be chatty with your money; possibility to sabotage central gov through debt limit / gov shutdown), that's mostly people. If the USA impose after WW2 its constitution on Germans, then they would anyway behave in their own, more compromise aimed way.

    Assuming that there is a simple fix to US system, I'd say more decentralization. It would not solve problems, however, it would let a few crazy ideas being tested and no-one would dare to express his support for them any more.
     
  5. May 16, 2015 #45

    phinds

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    I can't figure out what you are saying in this sentence.
     
  6. May 16, 2015 #46
    Imagine making the USA more decentralized and a state where Tea Party would have really big power and implemented a few utopian ideas.

    Let them locally cancel safety net and apply gold standard.

    Do you think that after a few years many people would try to convince you that such idea should be repeated in other places? ;)
     
  7. May 16, 2015 #47

    phinds

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    I believe you are right in that particular case, but it's a horrible solution
     
  8. May 17, 2015 #48
    You know, now we have in Poland presidential election, some I'm in somewhat sadistic mood.

    Honestly speaking I see one serious problem:
    -when I suggest some undemocratic ideas to deal with populism - then people around tend to be unhappy;
    -when I suggest some ultra-democratic ideas to deal with populism - then people around tend to be unhappy too.
     
  9. May 17, 2015 #49
    Well they could start by rescinding 90% of the laws that were passed since 1970. Then they need to cut government employment to 70s levels and give control of everything back to the states. There will be another great depression as the economy sorts itself out but after the suffering is over we will have a healthy sustainable economy.
     
  10. May 17, 2015 #50

    phinds

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    Uh ... you're SURE about that, are you?
     
  11. May 17, 2015 #51
    Yes I am sure of that. You can't have bigger government and less government spending both at the same time. Yes you could increase the tax base to make up the difference but that will only slow down the economy even more resulting in less money into government coffers.
     
  12. May 17, 2015 #52

    phinds

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    Yes, I agree on that side of your statement, but the other side of your statement expresses a degree of confidence in the states that not every one shares.
     
  13. May 17, 2015 #53
    Well the more local the control the more responsive a governing body can be to local needs. The US was founded on the idea of strong local control and weak central government. The more we have strayed from this the more it has become impossible for an individual to support themselves. Don't get me wrong we need federal laws like pollution control and equal rights but sometimes less is more if you get my drift.
     
  14. May 17, 2015 #54
    A prime example of the is the US Department of Education. Never have we spent so much on primary education and received so little in return.
     
  15. May 17, 2015 #55
    It sounds accurate but when have serious consequences ever been a problem for politicians?
     
  16. May 24, 2015 #56

    Drakkith

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    A number of low-quality, off-the-wall replies have been deleted. I remind all members that normal PF rules still apply here. If you don't know anything about how the economy and national debt works, don't bother posting your 'solution'.
     
  17. Jun 1, 2015 #57
    Government debt is incurred as pivotal part of the normal functioning of the U.S. Economy. Material assets are generally increasing (for reasons such as population growth), and if the supply of money is not increased in turn, then eventually deflation related problems are bound to occur.

    A pivotal process by which money creation happens is Federal Reserve lends new money to either the US Government or the private member banks. The money is further multiplied greatly using fractional reserve banking. Either way, the functioning of the economy is seemingly dependent on these major institutions incurring forever increasing amounts of debt. The debts will only increase; interests owed back to the Fed really can only be payed by continuing to take out more and more loans*. I believe this is by design. It could continue for many, many years in theory. Foreign governments complicate the picture, but it has been remarked by some that debt owned by other countries is not as big a problem as it might seem, due to the limited options of what to do with their dollars.

    It's important to remember that these institutions (the Treasury and the primary banks) have access to "cheap money" at special interest rates well below that which normal person may access. Their debt is not like that of a typical person. There is more to say about this issue, but I thought it was worth chiming in with my understanding present understanding of financial reality in this country increasing US Gov't/member bank debt is almost a mandatory part of or present financial system.

    *there are more extraordinary forms perhaps, but I think this is the usual process.
     
    Last edited: Jun 1, 2015
  18. Jun 2, 2015 #58
    I believe the US will always have debt problems as long as it continues to try to act as the world's policeman. Our defense budget is over $600 billion with China second, estimated to be about 220 billion. I admit to being a bit of a Rand Paul, but from the left side. I'm a veteran and have held these beliefs since the time of my service. While our infrastructure is collapsing, we are waging war in the mideast and facing down two nuclear powers; Russia and China. Once you get into a situation like this, it's hard to get out. I get it. If you look weak, you encourage bad behavior by other powers. If we get out of this without a war, I think we must insist that US's primary interest is to protect its own people The world vilified us for our attempt to stop "communist" expansion in SE Asia. Now we are making nice with Hanoi and they are still "communist". Meanwhile nearly 60,000 soldiers, airman and sailors were killed and several times number that maimed in the Vietnam fiasco. Our deficit will improve when we start spending more money on ourselves, and less on policing the world.

    We can reduce our defense expenses by reducing manpower and increasing the development of drones and robots. I think a really effective missile defense is possible. I won't go into detail because the thread is about the US deficit. Right now we spend 3.5% of our GDP on defense. Germany spends 1.1% as Europe's leading economic power. Europe, more than the US, is facing an increasingly aggressive Russia, but the attitude is that it's our problem. The Poles don't trust western Europe to defend them and have recently greatly increased their military spending. Good for them. I've been to Europe many times. They generally regard Americans as uncultured fools if not the real threat to world peace. So let's be be less threatening and less foolish by leaving NATO and telling them to solve their own problems with Russia. Afaik, so far at least, Russia has not laid claim to North Carolina. We don't have to be in NATO to have normal relations with Europe.

    Even with reduced defense spending by focusing on the next war, not the last one, we will still have debt. The goal should be, not to eliminate the national debt, but to limit it about 50% of GDP. Even that will take some time. We've run annual surpluses before and can do it again, but not if we insist on being the world's policeman.

    http://en.wikipedia.org/wiki/List_of_countries_by_military_expenditures
     
    Last edited: Jun 2, 2015
  19. Jun 2, 2015 #59
    But you said you wanted to reduce the spending? I mean such shields don't come cheaply...

    I thought that US aim after WW2 was to install as pacifist as possible gov in conquered Axis countries. I consider as a bit funny that you are unhappy that your policy... worked.

    As Polish - I'd like to mention that we militarily supported USA in Afghanistan, Iraq and let you broke a few human rights concerning interrogating terrorist on our soil (for which my gov was fined by European Court of Justice) for implicit US guaranties.
    Are you politely telling us that we're suckers?
     
  20. Jun 2, 2015 #60

    PeroK

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    That would be US casualties. Not counting the estimated 1.1 million deaths the North Vietnamese suffered.

    That's robust policing to say the least.
     
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