A reclusive billionaire, anti-tax crusader and major financial backer of Donald Trump has been named as the anonymous private donor who gave $130m to the government to help pay US troops during the federal shutdown that is now in its fourth week, according to the New York Times.
The donation, which equates to about $100 per service member, appears to be a potential violation of the Antideficiency Act, which prohibits federal agencies from spending funds in advance or in excess of congressional appropriations – and from accepting voluntary services “except in the case of emergency involving the safety of human life or the protection of property”.
Potential penalties for violations include both administrative and criminal sanctions such as suspension or removal from duty, fines and imprisonment.
Can you explain to me like I’m a five year old how paying off debt ruins the economy? I’ve heard it before but was never able to wrap my head around it
Paying off the US debt would mean paying back existing bondholders without issuing new bonds. After all existing bonds have been paid back, there would not be any US bonds in circulation, and the US bond market would be no more.
US bonds are the backbone of the global financial system. If they were to disappear overnight, it would be a financial apocalypse. On a larger timeframe, I suppose the global financial system could readjust, but I can only speculate as to how it would do so and what consequences would follow.
In any case, paying off its debt would be detrimental to the US, because global demand for its bonds results in higher bond prices and thus lower bond yields. In other words, the US pays less interest than it otherwise would because its bonds are so sought after. By paying off its debt, the US would not pay any interest whatsoever, but it would lose a great deal of power abroad.
As far as I understand, all the money/asset value that goes into funding an organization is owed back to the investors, whether it’s as services bck to taxpayers, or dividends back to stock investors. Any start to an organization involves people/ other organizations seeding it with money
Taking on a loan gives you both money (pretty liquid assets) and debt (liabilities). If you just use that money to pay back the debt, you’re back to no liquidity - no leverage to do the things that cost money to get kickstarted or keep maintaining.
So the idea is that, if an organization uses too much in funds/all the assets to pay back the debt, they may not have enough left over to maintain/grow operations.
Source: I’m taking accounting, am struggling, and hate how evrything seems absolutely bonkers at first. But also, it all makes sense. Because real accounting accounts for goddamn evrything.
Because rich people don’t actually buy anything- they just get a loan, using their potential income as the collateral. You and I aren’t rich enough for that, and paying down debt prevents that sort of thing from happening as well.
That isn’t relevant to the question being asked. The question is why paying off the national debt is bad and the answer is that the world economy us heavily invested in US Bonds.