If a balanced budget led to a flat or negative GDP, reduced the USA’s power and influence globally, and/or lowered standards of living, then would it still be desirable? What exactly is the argument against a deficit besides that it might be giving some groups leverage over the USA, which is dubious?
The argument is that it inevitably gets you to a state like Argentina was in, where the government repeatedly defaults until eventually you're forced to crash the economy for years to escape the loop. I'd rather have a flat GDP than 95% annual inflation.
I hate threads like this because of all the misinformed debt hysteria.
People like to bring up places like Argentina and Venezuela, but their debts weren't denominated in their own currencies, so they had to collect dollars in order to repay debts in dollars. As a currency issuer, since we create dollars, we can never run out of them. Nor do we have to round up dollars and take them back from currency holders before we can repay a debt. Doing so just takes those dollars away from the non-government so that the issuer can zero out a ledger somewhere. The interest is interest we choose to pay, for some reason. The only way we could default on our debt is if we decide to. The only way to "pay off" the "debt" is to take all the dollars away from the non-government, which is _us_.
Respectfully, it's you who's been misinformed by viral but false monetary theories. It's true that the US government can't run out of dollars in the same way that you or I might run out of dollars. It's not true that the government has no fiscal constraints, or that taxes and spending are unrelated parameters.
> The interest is interest we choose to pay, for some reason.
Perhaps this is the best point to talk about, because the precise way in which it's untrue is very concrete. The US government doesn't choose how much interest it feels like paying; it sells securities which promise a specific payout schedule according to an auction-set interest rate. If investors want to buy at a high interest rate, there's no mechanism for the government to demand they accept a lower one.
I never said that we have no fiscal constraints, just that the common misconception is backwards. I also never said that the government chooses the rate. It chooses to pay interest when it chooses to sell securities.
I think the popular misunderstanding is more harmful than some of the misunderstandings you point out (which some people may indeed have) because it leads to people pushing austerity because of their monetarist dogma.
Nobody ever asks who's going to pay for stuff when it's so-called "defense" spending. But if we want health care or education then it's all apoplectic "debt, hyperinflation, enslavement of future generations, where's the money going to come from!?"
I’m not advocating for war but one thing this deficit pays for is being a military superpower, which is the main way our debt is “guaranteed”. As in, call in the debt at your own peril.
US government debt doesn't exist as a line-of-credit agreement that someone could choose whether or not to "call in". It's primarily represented by Treasury bonds, securities which represent a promise by the US government to pay a specific amount of money at a specific point in time. It's true that the US can decide one day to default on these promises, but this doesn't have anything to do with military strength, nor can military strength mitigate the negative consequences for the (mostly domestic) investors.
He's not advocating it. But it's simply the reality of the US as a superpower.
Just look at Panama this very week. They were threatened to be invaded if they didn't give up economic deals with China and go back to being a servant colony of the US.
The odds of citizens cashing in and demanding all their money at once is pretty slim. The odds of countries that hold US debt doing it are better. But there's a strong deterrent for countries doing that. And it's the reality that the US has no issue with invading, and they've done it countless times this past century to the applause of the voters.
