How does the country's debt affect me?

[uRabbit]

I have little to no knowledge about just how our government system works, other than that we are worse-off here than in Canada. (Flame on! ;P)

Could someone explain or link me to something that will explain how the U.S. debt affects its citizens? Also, any reason not to start working toward a Canadian citizenship?

[timbuckley10]

In relation to the U.S., the main concern about the way that the government is currently choosing to add unprecedented amounts to the public debt through the method of "quantitative easing" is inflation in the long term. In order to prop up the markets and bail out the banks the government must spend billions upon billions of dollars. Since they don't have that, the treasury creates a massive amount of bonds and sells them to the Federal Reserve. There is a very simple reason the Fed can afford to buy these bonds and that is because they print money.

The general assumption is that the government's actions now, are going to lead to inflation in the long run. Of course this is subjective and everyone has their own take on it.

And there are not a lot of reasons not to start getting the Canadian visa in order. :P

[uRabbit]

Haha. We really would move to British Columbia if my family was not here in Idaho. Though we plan to move to Portland, and Vancouver is only half than 2x further... Heh. Also, the government is working to privatize hospitals, which is hurting the nursing community (and all healthcare professions), and nursing is what I will be studying.

So. Inflation. I assume that it would be more drastic than what we are used to. Hmm.

[timbuckley10]

Yes that's the idea. Some more extreme opinions even use the term hyper-inflation. There are many theories from many people about what the long term effects will be and unfortunately few are cheerful.

[maat55]

National finances have repercussions on the stock market, the soundness and dispersion of entitlement programs(SS/mericare), the worth of the dollar and above all, the retention of freedoms.

You can expect higher payroll taxes, lower benefits, higher costs in healthcare and education, and lower buying power with your earnings. The national debt comes with interest cost that can only go up with higher interest rates. Like at home, if you have higher credit card debt, higher interst rates will take up more of your disposable income. To us, this means higher taxes with less benefits.

[bjl584]

National finances have repercussions on the stock market, the soundness and dispersion of entitlement programs(SS/mericare), the worth of the dollar and above all, the retention of freedoms.

You can expect higher payroll taxes, lower benefits, higher costs in healthcare and education, and lower buying power with your earnings. The national debt comes with interest cost that can only go up with higher interest rates. Like at home, if you have higher credit card debt, higher interst rates will take up more of your disposable income. To us, this means higher taxes with less benefits.

The only way out is to increase revenue to the govenment. Whether it be through increased taxes or increased economic activity. And that assumes that the politicians in Washington will actually use the increased revenue to pay down our debt obligations and not use it to grow the size of government therby increasing our debt.

[tripods68]

How does the country's debt affect me?

1. If you own a HOME
-Cost of borrowing will be higher
-Higher interest rate, means higher DOWN PAYMENT or INCOME to qualify for mortgage rate
-Ability to REFINANCE will be TOUGHER since rates will climb

2. Creditcard Holders
-Current rates will SPIKE - therefore higher borrowing cost


3. Gas
-Oil countries uses DOLLAR to trade - It cost more to fill up your gas tank
-higher gas cost means, less traveling or trips (STAYCATION NETFLIX)

4. FOOD
-Prices will go up (added fuel cost to deliver the products).

5. Tax - Both Federal and Local Tax
-US need to raise taxes to pay for its debt, either raise taxes, closed loopholes, or eliminate some, if not all tax incentives like Mortgage deduction, or raising capital gains (taxing the rich 2% Americans).
-Losing tax incentives is equivalent to TAX INCREASE to low to middle-class Americans.
-Local taxes are losing revenue due to declining home prices; therefore, less revenues for local, city governments.

7. Old Americans retired or 65 years or older who rely on fix income like Social Security and Medicare.

-Well...basically you are TOTALY SCREWED!

8. American Economy will take longer recovery.


9. Bottom line- Behavior will change. Your ability "to do things, buy things" whether to go watch movies, eat out with friends and family, or going from point A. to point B. That's either good or bad which will depend whats left after you have paid all your bills (Net Pay + retirement contributions MINUS Liabilities) to none existence.
Unless of course, you are highly paid Americans who simply like to spend spend and spend some more. Then all these things I point out won't matter.

Almost forget to mention Inflation, but you get the drift.

[Frugal]

Thanks for sharing that, Tripod68. I agree with you largely that this is the reality of what will happen. I myself have been shocked at how high grocery store prices were yesterday. My bill was $107, and when I was done I looked at what I had stocked in the refrigerator and freezer, and it sure was not much! (Oh, and that was $107 for two people ONLY!!). I used to be able to keep my bill to under $85 per week or week and a half, with coupons, etc.

I am not kidding. The rice milk I normally buy (allergic to dairy/wheat) had gone up from about $1.38 two or three weeks ago to $2.85!! I realize this is a much greater increase then 20%, but I noticed an average of 20-30% inflation from the last time I was at this grocery store two weeks ago! I could hardly afford some of the stuff I needed!

If we see a debt default, and that is a big if, we will notice the results very, very quickly. Loans will be harder to get, interest rates higher, and food prices will rise DRAMATICALLY. Plus, we may notice Social Security checks, etc. stop coming. millions of older people may be left without a way to get by.

[uRabbit]

Frugal, my wife and I spend less than $50/week on groceries.

Thank you tripod.

So... Everything will go UP. Haha great

[KTP]

Canada gets away with spending very little on military. I forget how many aircraft carriers they have in operation, but it can't be many. I am not sure how much longer we will be the unpaid, unloved world police. It may be in the future Canada and various other nations will be required to actually defend themselves if the USA is not around so that could be a consideration. They have a lot of resources that could be put to great use by China....just sayin...

Edit: I just looked it up and Canada scrapped the only light aircraft carrier they had in service in 1971.

LOL

[Joan.of.the.Arch]

The rice milk I normally buy (allergic to dairy/wheat) had gone up from about $1.38 two or three weeks ago to $2.85!!

Think about making your own, perhaps at least through the winter when you might be heating your house anyway. How to Make Your Own Rice Milk | eHow.com

[tripods68]

I am not kidding. The rice milk I normally buy (allergic to dairy/wheat) had gone up from about $1.38 two or three weeks ago to $2.85!! I realize this is a much greater increase then 20%, but I noticed an average of 20-30% inflation from the last time I was at this grocery store two weeks ago! I could hardly afford some of the stuff I needed!

We already see gas prices (although lower than a month ago) and food prices sky rocket. I remember we had RICE shortage few years ago. Our family loves rice and our groceries bill went up some like 30%. Our gas cost went from $250 weekly average to $400. Our trip to Seattle this weekend for a week will cost us $450 just on gas alone, excluding food, entertain, gifts. We see it, feel it everyday our disposable income being depleted paying higher and higher on other things just about EVERYTHING.

[Frugal]

Tripods68, I feel your pain. We seem to have less and less of disposable income. All the people that seem to think everything is rosy...well, I am not going to get into an argument here. Suffice it to say, times are hard, and going to get harder in terms of food inflation, etc., regardless of whether or not the United States defaults.

I forgot that rice prices have indeed rose, but I am glad you reminded me. Now I know why rice milk is so high. I bought almond milk instead.

[jteezie]

Debt IS GOOD.

Debt contributes to inflation. Steady inflation is a government policy because a healthy inflation rate encourages companies to invest their money to earn returns that beat the rate of inflation.

Debt is a major driving factor in our improving quality of life. The reason we are printing and spending so much money right now is because we would have a negative inflation rate (deflation) if we didn't do this. What this means is, EVERYONE will stop wanting to spend money because it will be more valuable tomorrow vs today... but then the economy would STOP completely and crash.


I should note this works for governments which control their ENTIRE currency because of a concept called purchasing power parity (PPP). Lets say your economy consists of 100 apples and $100. In this world $1 buys 1 apple. If the government prints money or issues debt, it raises lets say $25. Well now you still have 100 apples but now $125 dollars. Now an apple costs $1.25. This is what people hate about inflation... but lets look at the situation where inflation is good.

The govt issues $4, so inflation is 4%. What the government hopes companies will do is:
Invest $1 into some sort of technology that can create 1.04+ apples. So 104 apples and $104 means 1 apple = $1. What usually happens though is the company invests $1 and they make make 1.1 apples (they are really good at investing their money into good technologies). So now we have 110 apples and $104 meaning apples are now $.95, or $.05 cheaper. If we think about real world products/services... these cheaper apples are our cheaper technologies. This is why everyone can buy a car, an iphone, ipads, etc. This is really good right? So why don't people like inflation?

People don't like inflation because they aren't the ones investing so they don't see that good return. Instead they are holding onto lets say $1. Well that $1 could have bought an apple, but now $1 isn't worth the same as before because before there was $100 in the economy, and now there are $104 due to inflation. The dollar is worth less now.

Hopefully that made sense.