Bear Ribs
Well-known member
There are two major and significant differences between how nations handle money and how individuals/families do.
First, when the government spends money, typically most of that money comes back to them anyway. Give a guy a hundred bucks? It's got sales tax on every penny spent, about of quarter of it will wind up income tax if said guy is middle class so maybe a third of it returns in the first day, and whatever store he spent it at it will wind up also being taxed when they spend it so most of it's back in Government hands in short order. So the government spending money, even frivolously, doesn't quite work out the way it does for families. This is, incidentally, why "Leader skipped into exile with most of the national treasury" can be so crippling for third world nations, the money leaves their economy and quits recirculating.
Edit: A useful analogy here might be comparing an individual's income with drinking water and spending urinating, you have to have a continuous amount of water coming in to survive, and what's urinated out is lost. Government money is more like blood, as long as there's enough of it and there isn't a catastrophic amount lost, it will continue to flow in a closed loop and keep the nation alive.
The second major thing is that nations are functionally immortal. Bob on 221 Walnut St. is going to grow old and retire at 65 or so, and living perhaps 20 years past that. His debts need to be settled in that timeframe and lenders take that into account. The US, on the other hand, will fall eventually like all things but may stumble forward for a century, three, or even more. Consequently, it doesn't really matter if the US can't pay back the principal as long as it keeps up on the interest, because the US never has to retire and thus settle its debts and live on its pension. There will always be another generation of taxpayers to pay down the interest and the principal never becomes due*.
*More accurately, whenever it becomes due they issue bonds to the next generation of taxpayers and simply turn the principal over.
First, when the government spends money, typically most of that money comes back to them anyway. Give a guy a hundred bucks? It's got sales tax on every penny spent, about of quarter of it will wind up income tax if said guy is middle class so maybe a third of it returns in the first day, and whatever store he spent it at it will wind up also being taxed when they spend it so most of it's back in Government hands in short order. So the government spending money, even frivolously, doesn't quite work out the way it does for families. This is, incidentally, why "Leader skipped into exile with most of the national treasury" can be so crippling for third world nations, the money leaves their economy and quits recirculating.
Edit: A useful analogy here might be comparing an individual's income with drinking water and spending urinating, you have to have a continuous amount of water coming in to survive, and what's urinated out is lost. Government money is more like blood, as long as there's enough of it and there isn't a catastrophic amount lost, it will continue to flow in a closed loop and keep the nation alive.
The second major thing is that nations are functionally immortal. Bob on 221 Walnut St. is going to grow old and retire at 65 or so, and living perhaps 20 years past that. His debts need to be settled in that timeframe and lenders take that into account. The US, on the other hand, will fall eventually like all things but may stumble forward for a century, three, or even more. Consequently, it doesn't really matter if the US can't pay back the principal as long as it keeps up on the interest, because the US never has to retire and thus settle its debts and live on its pension. There will always be another generation of taxpayers to pay down the interest and the principal never becomes due*.
*More accurately, whenever it becomes due they issue bonds to the next generation of taxpayers and simply turn the principal over.
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