Question

As you may know, governments usually run in large deficits such that their debt is huge. For example, in the first quarter of 2015, the debt of the US federal government was equal to the US GDP. That is, if the government wanted to pay its debt at that time it would need to appropriate all goods and services in the economy.

Do you believe this is a sustainable situation? Do you think the US government will pay its debt anytime soon?

Answer 1

In the first quarter of 2015, the debt of the US federal government was equal to the US GDP. That is, if the government wanted to pay its debt at that time it would need to appropriate all goods and services in the economy.

Though the debt may be equal to GDP, but I think that it is still sustainable situation this is because there is much difference between the debt taken by any government and the private loans taken by corporates or individuals as unlike individuals government takes loans for a longet period of time and during the time they keep on paying the interest for the debt and the principle is paid after a very long period of time. There is one more thing to consider that this amount of debt is not taken as a single loans but it comes from different sources both inside and outside the country and at different times. So the government pays back only those debts which are very old, so the government can easily sustain.

No, I don't think that the US government will pay back its debt anytime soon because it is in such a huge amount and can't be paid back in short period of time. As mentioned above government only pays interests regularly and only pays back those debts which are too old. It is also said by some economist that, The higher the debt-to-GDP ratio of a country, the less likely the country will pay back its debt and the higher its risk of default.