What are some negative consequences of the national debt?

[Jackson4Gore]

My friend is having to do an essay on the consequences of being a debter nation. If you guys can give me some consequences to pass along, I would appreciate it!

I gave him two right off the top of my head:

1) Debt is passed along to future generations, which creates a burden.
2) Debt makes it harder to buy neccessites such as body armor, etc. during a time of war.

If you guys have any more, please let me know!

[indepat]

1. Debt typically is either serviced as agreed or defaulted on

[TomClash]

2. Well, here's my two cents

you either have to consistently devalue your currency

or sell the assets of your country

or raise interest rates to attract capital

or export more than you import.

Or some combination of these 4.

[Seansky]

3. hey, the list is so long it trickles down to each individual basic needs a

and the rest of the world owning the products and money to satisfying them...

[wuushew]

4. Higher interest rates

also a loss in strength of the currency.

[kywildcat]

5. Skill based jobs are exported

making basic skills harder to find. We become a 'service based economy' without the middle class income that would consistently use those services.
Our taxes go up. The poor become even more disenfranchised (if that's possible) and resort to property crime. Our jails swell, human rights abuses become the norm and no longer shocking or a call to change.

[yella_dawg]

6. It is the nature of the current debt structure that is so troubling.

More US debt is held by foreign entities, specifically China's central bank, than at any time in the past. China is literally in a position to dictate to Washington by holding the "loaded gun" of debt to our head.

[Ready4Change]

7. It injures consumer confidence.

Consumer spending is the engine of the economy. Big national debt makes consumers (rightfully) worried about future economic stability. Thus they tend to hold onto, rather than spend, their money. We saw this under Reagan and both Bush adminstrations.

When government budgets create hope that big debts and deficits will pass, consumers relax and start to spend again, and the economy flows. This is what made the Clinton economy work and, I contend, why the economy started slowing at the end of his second term.

Just my non-economics educated opinion.

[GOPS Worst Fear]

8. How About Throwing Away Billions On Interest Payments Alone?

All the money we have spent in the past just to pay the interst payment could have gone to pay for many other programs. And let's face it.If the National Debt was paid down to almost nothing,I wouldn't mind cutting taxes.

[Sgent]

9. As has been mentioned, and a few more....

high debt means:

1) Higher interest rates -- for both the governmetn, and individuals/business in the economy.

2) High debt prevents economic growth, by forcing money that would go into capital expenditures to be used for debt service.

3) High debt weakens a currency -- thus increasing the cost of commodities such as oil, food, etc.

4) High debt can be used by the debt holders to exert political pressure -- see china and japan.

5) High debt subtracts from National Income, and therefore from individual income. Approximately 5% of our total economic production goes ot debt service.

6) High debt, by weakening the currency, allows for US based assets to be "gobbled" up by foriegn interests at prices below where they would be otherwise.

[applegrove]

10. US seems to be able to have a higher level of debt than other countries

without the negative consequences since the US dollar is the dollar of Oil & so much foreign government reserves. So that is a subsidy to how much debt the US as a country can accumulate.

That being said - all the debt went to war (to keep the markets burining in that "guns" choice in Keynsian economics). And the US has nothing to show for it. Rich tax breaks when to corporations who cut jobs in the US and was invested outside the US. That would be good in the long term if said Rich people would then bring all their "profits" home (bad for other countries though). But this generation of rich Americans are so rich they cannot possibly spend it all in the USA and most of it will remain in the markets.

So - US went into debt to pay for tax cust and keeping the market going. And middle class will have to pay off the debts if the rich have their way. All the while middle class & poor fight the inflation with lower wages by themselves.