Ask the grumpies: Macro 101– why can the US have so much debt?

First Gen American asks:

I don’t get the deficit and printing money in general. Why is the US able to be in such enormous debt and continue to grow it without short term negatives consequences aside from servicing the debt. I just read that something like 70% of foreign countries still use USD as their reserve currency Despite President Obama adding something like 7 trillion to the deficit during his 2 terms and Trump is continuing the spending spree with tax cuts. There are a number of articles in this question and I figured as economics people you may have more of a clue.

At some point it’s not sustainable. Does anyone even know where that cliff is? Does anyone care? Is there a real risk of economic collapse at some point?

The short answer is:  We’re ok so long as enough folks believe we will not renege on our promises.

Longer answer:  We’re ok so long as there’s still decent GDP growth.  We’re better off if that spending is investing in our future and worse off if it’s contributing to widening income inequality.  (This was one reason I loved HRC– she really got that.  Spend on investment.)

Let’s see if I can find a good longer answer somewhere online.  There must be a wikipedia page or something… This investopedia article seems reasonable, laying out all the different arguments.

Basically, some debt is good because it contributes to investment so long as the rest of the world believes in the continued existence of the US as a country (and not one that will refuse to pay).  Too much debt can cause problems.

Here’s a planet money podcast that doesn’t go into too much detail, but is somewhat interesting.

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