Prof. Antony Davies: 10 Myths About Government Debt

Professor Antony Davies explains the many miss-understandings about Government Debt. Myth 1 is that the government owes “only” $20 trillion. (In reality, it’s much more.) But luckily, Myth 10 is that there’s no way to fix this problem…

Myth number one, the government owes $20 trillion. How much is $20 trillion? Suppose you go to Germany, and in Germany, you go to every town. In every town, you visit every store. In every store, you look at every shelf and grab everything that is for sale. The amount of money you spend will not be $20 trillion. If you go to Germany and then to France and you go to every town, and within every town, you go to every store. In every store, you look on every shelf and you buy everything. You still will not have spent $20 trillion. You can go to England and while you’re there, you can go to the North Countries and buy everything that’s for sale, and you still will not have spent $20 trillion. In fact, to spend $20 trillion, you have to go to every country in Europe, visit every town, in every town, go to every store. In every store, look on every shelf and buy everything. And then you will have spent about $20 trillion.

But the myth is that this is how much money the government owes. It turns out that there’s more, called unfunded obligations. Unfunded obligations is money the Federal Government has promised but which it does not and will not have the money to pay. Largely, this consists of promises of retirement and medical benefits. If you would take the present value of all the future promises of retirement and medical benefits the government has made and subtract from that the amount of money that’s in the government’s Social Security and Medicare trust funds, and then subtract from that the amount of money the Federal Government anticipates collecting under the current law from future Social Security and Medicare taxes, you will still have an amount of money left over that the government does not have.

LEARN MORE:
How Big is the U.S. Debt? (video): A stunning visual representation of the ever-growing amount of debt and unfunded liabilities being accumulated by the federal government, narrated by Prof. Antony Davies.
How Should Governments Deal With Debt? (video): Nations that spend themselves into debt face very difficult choices. Prof. Steve Davies describes the three main choices that governments have to fix their debt problems.
Debts, Deficits, and Spending Cuts (video): Prof. Jeff Miron of Harvard University explains we should focus on reducing spending, rather than managing the deficit, if we want to reign-in the runaway national debt.

TRANSCRIPT:


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STUDENTS FOR LIBERTY:

[christopher]

"Inflation is a tax on savings." I've never heard that before, but it's the most concise way to summarize the issue.

[JoJoRock]

Myth #11: politicians want to fix this problem.

[casesusa]

If history teaches us anything we know for sure that nobody is going to learn from history.

[BrianMegilligan]

One thing that is overlooked is that while inflation erodes your savings, it also erodes your debt. Those who have "good debt" (debt tied to assets) will come out ahead as the amount owed is locked in while inflation means it gets easier to pay. This is undoubtedly the same strategy the government is deploying as it is much easier to pay 1980's debt with 2022's dollars.

[lawsonharrison]

"By the time it catches up with me I'll be dead."
The slogan of a government representative.

[Smedleydog]

A politician will spend $millions of other peoples' money to get a $150, 000 a year job. That says it all.

[CCP_Xyed]

The problem is:

The SALARY will NEVER increase at the same rate as prices.

[AnnieHolsen]

The US economy cannot survive without continuous credit and debt creation. The FED will print more money and the average American will go just that much further in debt. Meanwhile, foreigners lust for the greenback. Their economies are in worse condition than the US... if that's even possible. Someone is going to be left holding the bag...

[jeremymenning]

Prices up at the grocery store.
Quantity pricing per unit up even more.
The gas pump is still steady.
Electricity wants 40% increase.
Cable, internet, phone all increasing 10-15% per year.
Paid $17k in taxes this year and was told I still owe additional $4k.
Haven't had more than a 2% raise in more than 2 decades and usually less than 1%.
National debt is catastrophic.
College for my son will be impossible to fund.
I'm failing to find where this works for most Americans because I consider myself extremely fortunate (with "a lot" to lose).

I mean is anyone else just tired of this bullsh!t spin?

[tonysohal]

“Inflation is Taxation without Legislation” - Milton Friedman

[karcharias]

The moral bankruptcy came first, then the financial one later.

[Xsplot]

When the government prints money, the price of goods and services rises faster than salaries do. So not only does the printing of money erode the purchasing power of savings, it also erodes the purchasing power of most salaries.

[iamtheoffenderofall]

It took a 100 years to grow this that the federal reserve and federal income taxes are about 100 years old?

[eydiepreston]

The "government" doesn't print money, the privately owned Fed Reserve does. It is neither Federal, or a reserve....

[theback]

Inflation is not just a tax on savings. It's also a tax on income. In scenario 2 the government conveniently "forgets" to adjust tax brackets accurately. Now you're taxed at a higher rate when your income doubles despite the fact that the cost of goods doubled. Also the cost of goods doesn't really double when you print twice as much money. Vendors take awhile longer than expected to raise prices because they don't notice immediately when the govmt prints money because it's done slowly. The reality is when the money supply doubles there's a 5-15% lag in prices in a lot of industries. In addition to that, the dollar is the world reserve currency, and in order to buy OIL from multiple middle eastern countries you must purchase it with US dollars. This is called the petro dollar scheme that Henry Kissinger came up with. Basically we offered the Saudis and others military protection in exchange that they only accept US Dollars for oil. In this way every country must obtain US dollars, and must therefore sell us things. They are forced to trade with us which puts additional competition and pressure on downward pricing when exporting a good from (insert country here) to the US. But the main thing it does is spread US dollars all over the globe, effectively spreading out our inflation per person. This effectively adds billions of citizens to the US debt scheme unknowingly. In a way if you or your country is using US dollars, you may not be a US citizen rights wise, but you are helping relieve US debt unknowingly. This genius scheme is what allows the US to keep printing money at will and until it is undone the US will remain the world's greatest super power by far.

[susannnico]

This is financial advice and I never give financial advice: DONT LEAVE DURING THE BEAR. If you don’t want to invest…learn. If you don’t want to learn…build. If you don’t want to build observe. DO SOMETHING…other than leave. There is so much opportunity here. Take advantage!

[TheBamm]

People are too distracted by matters of no real importance to see the facts and figures.

[sasquatchycowboy]

"One of the prices that will double is your wages". Yeah right, that's been exactly how that has worked. We had our buying power ripped away, and our savings destroyed.

[MetroAndroid]

20:42 "It took perhaps 100 years for our debt problem to grow to the size it is now."
Federal Reserve, established: Dec 23, 1913.

[GilbysGrDay]

This is soooo good! Would love to see the stats and figures updated again in 2023, especially after topping $30T in debt, another looming gov't shutdown, and an estimation that the US is expecting another $19T in debt by 2033. If we could pay off some of that debt, just imagine what we could do in this country with all that interest money if it weren't going to service the debt.