What is the actual penalty if the US national debt is not paid off?
Question by Alex: What is the actual penalty if the US national debt is not paid off?
Everybody always complains that our country is in debt, and I understand that and that the debt is constantly rising, but what will actually happen if the country does not pay off the debt? I also understand that the US is indebted to many different countries, so would there be penalties from each country that the US does not pay back? How does it work?
Best answer:
Answer by cantcu
Interest on the debt, which is about 1/2 of the National budget and is untouchable.
If they don’t pay it back, I assume these countries would be in court trying to seize our assets.
We have a lot of options, to include cutting off the oil subsidy at $ 60 billion, The farm subsidy at $ 20 billion, the Ethanol subsidy at $ 7 billion, among others.
We can also glean another $ 400 Billion a year by letting the Bush tax-cuts expire for the top 2% in America. We can cut defense spending and pay down the debt which would decrease the amount we owe and have to pay interest on. We are not broke.
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our money becomes worthless and inflation would skyrocket.
As the debt rises the interest payments grow until all tax revenue goes to pay the interest with nothing left for defense, medicare, medicaid, Social security or anything else.
As the possibility of the Nation defaulting on the debt grows bond rating agencies lower your rating and lenders charge ever higher interest rates.
Eventually no one will lend to the United States and the economy would collapse.
The longer you take to fix the problem the worse it gets until you reach the point of no return.
For further information google Zimbabwe or Weimar Germany.
Well, the U.S. does not borrow from or directly owe foreign governments the same way you take out loans and owe specific lenders.
The government’s debt is in Treasury securities they sell http://www.publicdebt.treas.gov/
Investors, including foreign governments own some of those securities
The reason is they are safe, reasonably secure investments that offset moderate and high risk investments. Actually the majority of the public debt in Treasury securities are owned by 401K/IRA pension trusts, mutual funds and private trusts funds. If you own a 401K and see around 15-20% is in conservative funds, the majority is U.S. Treasury securities. So you and other Americans actually own most of the debt. Foreign ownership isn’t as much as the myth portrays http://www.treasury.gov/resource-center/data-chart-center/tic/Documents/mfh.txt
After the 08 stock and commodities crash, many retirement plans would have been totally trashed had it not been for those securities investments. They do serve a purpose other than keeping a lot of money that would go to taxes, in the private sector.