In democracy, citizen decide how the tax money is spent by voting, usually it’s an indirect vote : you elect people to vote the budget, which makes sense considering the difficulty on the tax. But typically, left wing will put more money in education, healthcare, and rehabilitation programs while right wing will put money in police, militaires and supp rt outsourcing essential services to private corporations. Stuff can be complex as you need to pay pensions, state worker, fulfill international commitment (EU budget, NATO budget) and maintain all the existing infrastructures, and only then you can invest/re-allocate budget (which can trigger an outrage, cutting welfare expense or closing a hospital can have dramatic consequences for citizen)
If there isn’t enough money se government can borrow money, typically they don’t go the bank but say they need X billions for Y years and find investor ready to lend them this money (it tends to be quite safe, do you foresee US or Germany not paying their debt in 5 or 10 years?) alternative is to print money (aka inflation) or raise taxes. For structural investment that will bring monee, it makes sense to pay them over 10 years with the extra tax yield thanks to the new highway/university/dam. However, it also means that instead of “taxing the rich” you borr w their money and give them back, while us commoner do n’t directly see our tax money ney back
that’s the fun part of centering your country as lodestone of international finance/trade, entire western world is basically held hostage by USD (also, their rich people love the US’s unregulated markets and under-educated population as easy exit liquidity)
For example an event like chaotic policy means countries no longer use your currency as a global reserve currency - would mean a sudden drop in investor faith that could trigger this. Or even deliberate disrupting the economy to devalue your currency, depending on whether we believe they’re smart enough to have a strategy or just take their chaos at face value
In democracy, citizen decide how the tax money is spent by voting, usually it’s an indirect vote : you elect people to vote the budget, which makes sense considering the difficulty on the tax. But typically, left wing will put more money in education, healthcare, and rehabilitation programs while right wing will put money in police, militaires and supp rt outsourcing essential services to private corporations. Stuff can be complex as you need to pay pensions, state worker, fulfill international commitment (EU budget, NATO budget) and maintain all the existing infrastructures, and only then you can invest/re-allocate budget (which can trigger an outrage, cutting welfare expense or closing a hospital can have dramatic consequences for citizen)
If there isn’t enough money se government can borrow money, typically they don’t go the bank but say they need X billions for Y years and find investor ready to lend them this money (it tends to be quite safe, do you foresee US or Germany not paying their debt in 5 or 10 years?) alternative is to print money (aka inflation) or raise taxes. For structural investment that will bring monee, it makes sense to pay them over 10 years with the extra tax yield thanks to the new highway/university/dam. However, it also means that instead of “taxing the rich” you borr w their money and give them back, while us commoner do n’t directly see our tax money ney back
I do forsee the US not being able pay debt in 10+ years and nobody will lend them anymore money.
that’s the fun part of centering your country as lodestone of international finance/trade, entire western world is basically held hostage by USD (also, their rich people love the US’s unregulated markets and under-educated population as easy exit liquidity)
Until everyone switches to the Euro as the world’s reserve currency because USD has become too volatile
Which is what Trump/Putin want.
How high can the debt to gdp get before the economic system collapses?
Until the government can’t pay it back.
infinity.
the issue isn’t the number of the debt. it’s creditors faith that you will pay them back.
things collapse when your lenders lose faith and stop lending. you could have a low debt to gdp ratio and that still could happen.
For example an event like chaotic policy means countries no longer use your currency as a global reserve currency - would mean a sudden drop in investor faith that could trigger this. Or even deliberate disrupting the economy to devalue your currency, depending on whether we believe they’re smart enough to have a strategy or just take their chaos at face value