Well, we all know something’s got to give.
The national debt is about $9 trillion, I think. Then to that, you have to add the unfunded liabilities of Social Security and Medicare, which could be as much as $20 trillion more, from some reports I have seen. This long-term debt is fundamentally the same as a giant Visa/Mastercard bill that the gov’t has to pay off. In recent years, we haven’t even been able to pay the interest on the debt. It just rolls over and accumulates and adds to the total debt.
Either we will see big tax increases in the future to keep up with the debt, big sales of gov’t bonds to other countries to get money to keep pace with it, increases in the money supply to keep pace, which will cause inflation, or some combination of all of these.
A balanced budget and eventual paying down of the debt is a sound business principle to bring to gov’t; i.e. don’t spend more than the gov’t is taking in.
Obama and McCain both should be challenged on this, esp. Obama since he wants to expand gov’t spending. He should be challenged on where he’s going to get the money to “invest” $150 billion in “green” energy programs, when the gov’t is broke to start with and deficit spending is projected even before Obama gets control of the national checkbook.
What are the ramifications for NOT paying back debt? For example, suppose the government says "screw it, we're not paying back the money we owe". If it owes money to another country what are they going to do?
I'm serious cause I'm fairly ignorant about the situation...what's the worst that can happen if they simply refuse to pay?
Big tax increases can't happen because they will destroy the economy. And significant reductions in spending, especially transfer payments, will have the same effect if made too abruptly. Other countries have caught on to our game, so the most likely track involves increasing the money supply.
Perhaps that's why the Fed doesn't publish M3 statistics any more. Either way, the Feds in New York and their buddies on Capitol Hill in Washington are playing a very dangerous game that may ultimately end with the fall of or significant devaluation of the dollar, to the detriment of anyone holding assets denominated in dollars.
Remember the canal bonds, paper money in the New England colonies before the Revolution, and the saying "not worth a Continental."
Just a note: increasing the tax rate, often leads to less total taxes being collected. Instead, dropping the tax rate to say, a flat 18% would result in a lot more money being collected; as well it would grow the economy greatly, making the debt less significant because it would be a smaller percentage of GDP.
The debt hit $10 Trillion already.
According to Peterson the unfunded future liabilities of only Medicare, Medicaid and Social Security are $99 Trillion dollars, not $20 Trillion.