Will we ever pay down or even pay off the national debt?


Tokyo markets; AP photo

Question/Comment: Given the history of the ever increasing U.S. national debt and our fluctuating economy, how realistic is it that we will ever pay down or even pay off the national debt? We have never managed to maintain the necessary focus and make a significant pay off before despite numerous periods of economic booms and unprecedented prosperity in the past. When the countries backing our debt start to clamp down, won’t the house of cards collapse? Is this fear the only thing keeping these countries from supporting more debt? Given all of the problems we continue to face and those we have yet to face, can you explain how this is all realistically feasible in the long run?

Paul Solman: I’ve answered similar questions like this a while ago, but for those who don’t commit my responses to memory, let me try again:

In the long run, we just keep owing more money, like almost all countries. We’ve NEVER paid back our national debt. And that’s no issue, so long as investors remain willing to lend to us. The problem is that when the debt swells, it becomes more expensive to service (pay interest on), and that can push other government expenditures aside.

But with an economy in recession or worse, as it now threatens to be, the government is SUPPOSED TO spend more than it takes in – as a way to stimulate the economy back to growth. That is, we citizens get too scared to spend, and that threatens the businesses we typically patronize. If they’re not to go out of business and thereby lay off more people and thus making things worse, the government has to put money in people’s hands, and/or spend it directly.

Thus we have the talk of a huge infrastructure program – for bridges, alternative energy or pretty much anything useful; a new New Deal that would arguably HELP the economy by putting idle resources (people, land, factories) back to work. The idling is more expensive – to us all – than the debt we take on to get us back up and producing.