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The Unbearable Lightness of 13.9 Trillion Dollars

How you should think about running up the national debt, accompanied by assorted photographs of running animals

The United States is 13.9 trillion dollars in debt, which sounds like a lot of money because it is. It’s an incomprehensible, frighteningly large amount of money -- throw in the debts the government owes itself, and it becomes larger than the entire economy. And because it’s so huge, people often try to use the fear of the debt to scare others into making large, draconian changes to reduce that number dramatically, like severely cutting Medicare or eliminating federal agencies. The changes they propose typically target hardest the people who can least afford to take the hit: the elderly and the poor.

But things aren’t nearly as apocalyptically grim as they seem. Though the national debt hasn’t been talked about much during this particular election cycle, whoever wins, you can be sure that it’ll be back on the agenda soon. For instance, here’s Ted Cruz using the debt as justification for his pledge to get rid of, among other things, the Department of Education and the Department of Housing and Urban Development. Ted Cruz needs to calm down, and so do we.

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The first thing to realize is that the debt that the United States holds is not like the debt that you or I might hold, like student loans or car payments. While you have to pay off those debts eventually, the U.S. government doesn’t. It can be in debt indefinitely, because, unlike a person, it plans on being around indefinitely. The government doesn’t have to pay back the principle of the actual debt, it just has to make sure that it can make the interest payments on that debt. That means that you, the responsible taxpayer, don’t have to worry about some kind of institutional loan shark coming around and threatening to break your legs (or your children’s legs, or your grandchildren’s legs) if the country can’t come up with the money.

The government’s debt is also different from your own because the U.S. prints dollars, and the dollar is the world’s “reserve currency.” What that means is that other countries, central banks, and investors view the dollar as the world’s most stable and credible form of money. So when the global economy gets risky and people want a safe investment, they loan their money to the U.S. government by buying Treasury bonds. Because loaning money to the U.S. is seen as having little risk, people are willing to do it for fairly low returns. The upshot is that the federal government can almost always find people from whom to borrow money at pretty good rates.

So! If the government never has to pay off its debt, and it can always borrow money at a low rate to pay off the interest, then there’s never anything to worry about, right? Well, not quite.

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In the long term, it’s possible for high debt to hurt economic growth. One reason we have to worry about the debt is that if it gets too high, people who want to lend the country money might get skittish about the government’s ability to make those payments, and might demand a higher return on their investment to compensate for the added risk. And if they get a higher rate from the government, it might mean higher interest rates for the rest of us -- for students trying to get college loans, families buying houses, and businesses making investments.

So when the government runs deficits -- adds to the debt by spending more than its revenues -- it has to do so for a good reason (ideally, a reason that helps the economy in the long run). For instance, during the recent recession, government spending automatically went up because more and more people qualified for unemployment insurance or food stamps. At the same time, the Obama administration and congressional Democrats took steps to try to jump-start the economy by cutting taxes while temporarily increasing spending on education, infrastructure, and government spending. That’s part of the reason why the national debt has grown so quickly recently.

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But as the economy improves, that spending automatically comes down, and revenues go up as businesses grow and pay more in taxes. While relatively controversial with the general public, most economists agree that the government’s decision to try to give the economy a boost was worth it in the long run -- in other words, that increasing the debt was a good idea. In fact, some people think we should go further, taking advantage of low interest rates to spend money revamping the country’s aging infrastructure.

Ultimately, the federal debt is sustainable so long as the economy is growing faster than the debt is growing. This means that there are some challenges that we need to deal with down the line -- the costs of Social Security and Medicare are going to rise as Baby Boomers age, and the current political environment makes it anathema for Republicans to raise taxes, or for anyone in either party to make cuts or reforms to large government programs. But that’s less a recipe for apocalypse than it is a reason to start thinking about the adjustments we need to make to avoid being drowned in a rising tide of debt.

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There is, though, a way to move up the date of the apocalypse to … now. The United States could, for no real reason, decide not to authorize the government to borrow the money necessary to continue to run and make payments on the debt. This would probably tank the stock market, send the economy into a tailspin, and permanently damage the reputation of the United States government. Remember before how I said that people view Treasury bonds as almost completely risk-free? That wouldn’t be the case anymore, and it would throw a wrench in the machine of the global economy, as well as make it far more expensive for the United States to borrow money in the future. It wouldn’t be Hunger Games–postapocalyptic–Mad Max–wasteland bad, but it would be as close as we could get on short notice. Nobody would do that, you’re thinking, of course. Nobody would even be stupid or devious enough to threaten to do that as a bargaining chip.

That’s where you’re wrong. One dude rallied congressional Republicans to do exactly that in 2011. And not only does he have no regrets about doing so, he proudly boasts about it on his website. Who is this wannabe Immortan Joe, you ask? One Senator Ted Cruz.