During political campaigns and when discussing balacing the national budget, a concern that almost always comes up is the national debt. However, most Americans don’t realize that a nation’s debt is very different from personal debt. Similarly, the debt allows a very safe investment vehicle for the masses, while increasing trust in the United States finances. Thus, paying off the national debt would be both harmful to the economy, and a poor use of the government’s budget surplus.
Because of the misconception that National Debt needs to be paid off like personal debt, many Americans see this as one of the foremost issues with the balancing the budget. Yet, since the government doesn’t have a tangible lifespan like individuals, the debt doesn’t
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Greece only had concerns of defaulting since their debt was not in their own currency, since they used the Euro and no longer had their own currency. Therefore, the debt that US issues is perceived as extremely reliable, which incentivizes other nations and individuals to buy the debt.
Since the debt is reliable, most Americans have some amount of bonds in their retirement savings. Thus, keeping the debt will benefit American’s retirement accounts more than just keeping that money in a saving account. Since the debt is very reliable and pays an expected rate, Americans have better financial security and can compound interest in their savings accounts.
National Debt also allows more control over the financial security of the common American by giving the Federal Reserve instantaneous control over money supply. The only other way to control M1 money supply is printing more money, which is less effective in regulating the economy. Instead, the government can free up more money to individuals and banks, increasing supply of investments, therefore driving down the Federal Funds Rate. Without debt, open market operations would not be possible, making it much more difficult to adjust the Federal Funds