How is it that America is TRILLIONS of dollars in debt?

Prior to the 1930s (with the exception of the Mexican-American War), funding war operations was the primary cause of budget deficits. Primarily because of the policies promoted by the theories of John Maynard Keynes through the 1930s, artificially supported consumption in pursuit of "full employment" is the main culprit.

Keynes was a British economist/politically connected academic who gained popularity during the 1920s.

Until Keynes, economists were primarily viewed as protectors of the nation's long term fiscal and monetary stability. Politicians turned to them when seeking advice on the long term implications of the policies they were considering. Keynes changed all of that by repackaging old ideas of Mercantilism into the "New Economics." For starters, he had a life long affinity for networking. His list of politically connected international acquaintances would make any modern politician jealous.

Secondly, his ability to argue was unmatched. He could sell any idea, defend any premise, and embarrass any competitor who confronted him with witty, deliberate, and often factually incorrect statements that would go unevaluated until long after the discussion ended.

Lastly, he was able to combine those talents in to a book called The General Theory in which he argued that all global economic downturns were the result of falling demand and falling prices. He gave politicians a mathematically justified, although falsely premised, strategy for managing economic booms to get them reelected. Through Keynes, politicians gained academic support for virtually any spending program that could be devised. All with the goal of ending the perpetual boom and bust roller coaster that the "free market" had wrought on the system for so many years. Among many other completely illogical premises, Keynes argued that interest rates were historically too low, savings had no economic benefit, government spending (preferably of newly printed money or through newly issued debt) was the same as private investment, and that the only way to save the price mechanism of the free market was to completely destroy it through fiscal and monetary policy.

In the Keynesian system, politicians justify any spending they do as better than not spending because the results of not spending would be disastrous. They can't prove how the results of not spending would be disastrous, but they will insist on it until the day they die. While the world remained primarily connected to a metal standard (ie gold or silver), the government's ability to spend was tied to the productive capacity. The advent of the Federal Reserve in 1913 provided an avenue through which Progressive politicians could begin creating money out of nothing so that they could buy constituencies and confiscate the purchasing power of the property of those with the audacity to believe they own what they earn. When the Supreme Court re-interpreted the Interstate Commerce clause in the 1930s and 40s, Congress was given virtually limitless power to intervene in the economic life of every individual.

Never mind that this ignores every logical premise ever devised from the beginning of time. Politicians have the primary goal of getting re elected. Until Keynes, they were restricted by centuries of sound economic logic. Keynes replaced that with numerous formulas all devised to justify his policy prescriptions. All the advanced mathematics in the world can't make up for false premises.

Considering how tied together everything is, the countries that we owe money do will do everything they can to prevent it, short of causing a collapse in their own countries. Your average work a day citizen, be they republican or democrat, doesn't have a clue as to what is going on with the country financially, which is just the way most of the elite want it. The big boys are not too worried about a collapse, they are international corps and will just move to where the grass is green and wait it out. Anyone who remembers or has read about the Great Depression will know that the top 1% were inconvenienced while the rest of the country was traumatized. So I think you will find that both the Republican AND Democrats at the top really don't care that much.

Government exists because its' constituents pay taxes. Over the years, the government has used entitlements, lobbyists, pork projects and other means to influence peddle and buy votes. Sometimes the government taxes don't pay for all the entitlements and pork. Sometimes the tax isn't used for what they say they use it for. Example: the 26 cent/gallon gasoline tax is supposed to build roads and highway infrastructure. It doesn't. It's lumped into a big cash pool.

If it's not in the budget, Congress and state legislatures issue bonds to the general public. This is our debt. Soon we will not have money to pay the interest on all the bonds the government seems to have no trouble issuing until recently.

It is a terrible thing...

I'll just cut and paste from a question I just answered. Mr, we should be looking at all history then... not just Bush.

Bush didn't help (~$5T), Obama isn't helping (~$2T). But this really started taking off in the 1920's with Woodrow Wilson. During his tenure, he raised the debt by roughly 8X. It settled down for a little while until FDR took command. During his 12 years in office, he roughly raised the debt 12X (from $22B to $258B). There have only been three instances since 1950 when our debt level has reduced, with '57 being the last time. So all in all, they are all to blame... but the main originator starts with Wilson.

a countries personal debt- too many people with personal debt

if a county spends more money then it gets in taxes then it runs a deficit, if you are able to have a military big enough that no other country are willing to ask for it to be repaid and your economy is big enough to bring everyones down with you then you can afford to get away with more deficit, till it gets in the billions

P.S. For all you people who think its because of Universal Healthcare.

Canada has only run a deficit because of bailouts and the recession. Universal health care will keep people who are in the middle-lower class from economic ruin if there daughter gets cancer.

P.S.S.

Try spending more money healing your citizens and not shooting other peoples citizens.

Well, we are trillions of dollars in debt, but no other countries have the guts to do anything about it because we are the most powerful country at the moment. Obama wants us to pay it off. not the government, US. i think this is highly unfair, but hey, wat can we do? well, im stumped.

Hope this helps,

Mickey

the way to create wealth is to manufacture . we have sent our jobs to china and have no real good way to create wealth. we also give sooooo much money to africa for AIDS research. Medicare and Wellfare also cost alot of money to fund . so this is why we are in debt . ): i hope i helped you

They are too scared to tax the rich and so borrow the money instead.

what the people create, the government takes

Easy. Its called Obama-care.