Explaining government debt with metaphorfrom @npr

Transcript

$37,000,000,000,000 of government debt. No one's ever made it this far. How much further can we go before the ice cracks? No one knows. We could be really close to it cracking, or maybe we're not even halfway. If the debt gets too high, what exactly is the bad thing that's supposed to happen? Well, it might look like, one, we default on our debt. We miss our interest payments. People hesitate to lend us more cash. When countries do this, it usually doesn't go great, global financial crisis type thing. But two, since we're in control of the currency we owe, we good just print a ton of money and pay the debt off. This would result in, like, super mega inflation. Three, a thing called crowding out could happen. To take on debt, the government issues bonds, basically Yes, and pays interest on them. This could divert money away from productive investments like building factories or research, and this diversion drags the economy down. Also, now that we're way out here, there are new rank. Like this. Snowballing of best. We're making interest payments on our best, but to make those interest payments, we get into more debt, which leads to bigger interest payments. And then we need to get into more debt, and then even better, and then more debt. And then That sounds bad. Shouldn't we just pay it off? Yeah. We did that once. Right after that, we had the longest depression in American history. Why? To pay off debt, you're taxing, taking money out of the economy. Money that could be bouncing around inside of it as investment, causing it to grow. But if it grows the economy, the debt can be sturdy. Yeah. And some debt is weaker, like those interest payment snowballs. Those are relatively unproductive. In general, you just want your economy to grow faster than your debt. It's a balancing act no no one really knows how it works. Isn't that exciting?