Let Me Explain the National Debt

You've seen news about the debt ceiling. You've seen news of a shutdown. You've seen those big counters in cities like Las Vegas that tally the national debt and broadcast it for you to see how huge it really is more than $36 trillion, in fact. That's around $106,000 per citizen. But the question that doesn't get answered often is: why is having a large national debt bad in the first place? If the government can just keep borrowing and spending this money, then what danger is it in?

The answer lies in interest (the money kind. You'll soon see that politicians literally aren't interested in you at all).

When the government borrows money from a bank, it has to promise to give it back, plus some extra interest. Because no bank would ever tolerate the government taking money and never giving it back, the government does a Ponzi scheme to "finance its debt".

The government takes out a loan, uses the money on its spending, and needs to pay it back. Then it takes out another loan of the same size and uses it to pay back the original loan. But it also has to pay back the interest on the loan. It ends up allocating part of the budget to pay it.

This is why the percentage of the annual budget that goes to interest payments keeps increasing. The government spends inefficiently. Then it has to borrow to cover those debts, and then it has to pay the additional poisonous interest cherry on top of the putrid, foul, disgusting cake. The money the US has is limited, so the more interest the US has to pay to finance its debts, the less it can spend on things that actually matter.

(By the way, I know I've talked about how government spending is this terrible monster that's eating our livelihoods. Too much of it does eat our livelihoods, but some of it is actually necessary (the necessary part is a fraction of what we're spending right now.)

It's also a debt spiral. Once the US uses a second loan to pay back the original, it has to take out a third one to pay back the second one, with even more interest on top. It has to keep doing this, and the percent of the national debt in the budget keeps increasing because of it.

So what is the debate over the debt ceiling about? Well, the debt ceiling basically tells the government, "This is the maximum amount of money you can borrow to finance your debt." Because the US keeps borrowing to fund its inefficient spending, the debt ceiling keeps having to go higher to finance it.

The problem is that the system is really stupid and practically designed to fail.

Congress sets the budget in the beginning of the year (it's going to spend x dollars on stuff). Spending often overshoots whatever the budget was (because again, telling people that "we're spending to solve all your problems" is politically beneficial). When the debt limit ahs to be renegotiated, it's because politicians realize that they screwed up bigtime, because now they have to pay back all the borrowing needed to finance all that spending.

The only way to do that is to borrow even more.

Almost every time, this borrowing ends up being over the debt ceiling, and now Congress has to renegotiate it so that they can actually pay it all back. If they don't, the government will have a default and shutdown, and be able to spend and borrow literally nothing at all (which is obviously not a good thing). A government shutdown would be a global economic catastrophe.

Anyone with a brain sees that opposing this spiral of debt is a good thing. But politicians who try to say something about all this unnecessary borrowing have the cudgel of economic catastrophe held over their heads as their opponents yell at them about how they're risking a government shutdown.

They always end up capitulating and raising the ceiling because duh, they don't want an economic catastrophe. Raising the debt ceiling allows everybody who supported all this dumb borrowing to walk away scot-free.

The only way to fix this is to flip the order of budget-setting and debt-ceiling renegotiation. TO fix the problem, we need to tell the government that "this is the debt ceiling for the next five years. Deal with it. No takesies-backsies at the end). Then we'll have the cudgel of economic catastrophe held over the heads of people who wanted to borrow so much, so they'll stop supporting so much borrowing.

Need I remind of the consequences of borrowing? It raises the demand on loans, meaning interest rates from banks increase, credit requirements increase, and it's just a whole lot dang harder to get loans to buy a house, or a car, or anything American families need to buy.

If regular Americans learn about this system, they'll stop electing politicians who support them. That's why I'm making these posts that explain it all. I hope you can share these with friends and family, so that we can stop it once and for all.