Well of course what is possible for the government is not possible for you as an individual. You can go bankrupt, the government can't. You can not run permanent deficits, the government can. You can not dictate what is acceptable as payment for taxes and enforce it. The government can. (That's how fiat money is defined. It is what is acceptable to the government for payment of taxes. And that is why you will work for fiat money. You need it to pay your taxes.) In a closed economy, Household savings equals business investment plus the governments deficit. When deficits are too small actual savings will fall short of the desired level, and when they are too large, savings will exceed the desired level. The first case causes deflationary pressure and the latter causes inflationary pressure. The situation is not all that much more complicated for an actual economy which includes foreign trade, banking and finance. Up until full employment is achieved deficits should increase allowing incomes to rise and generate more savings. At full employment however, additional private sector income generated by further deficit spending will cause inflation. In other words, once full employment is reached, a reduction in taxes or increased government spending will result in inflation. This is all fairly standard, modern economic policy stuff. In other words proper regulation of the economy necessarily includes the government acting countercyclical to the private sector to stabilize prices and maintain full employment. It is much easier said than done though.
https://www.newyorkfed.org/microeconomics/hhdc.html $12.84 trillion personal debt https://www.newyorkfed.org/medialibrary/interactives/householdcredit/data/pdf/HHDC_2017Q1.pdf 33 pages. America embraced a debt driven consumer based economy which was sold to us by wall street.
One of the things you need to know about the US deficit is that it's not solely a function of the country's domestic income and expenditure. The US is a superpower, for better or for worse, and the issuer of the world's reserve currency. That is one of the main reasons why it persistently runs deficits. You can think of it as the world paying the US a tax.
As I said prior, what is good for the individual, when applies to the full population produces a bad outcome: As an individual, I need to not spend, save and save and finally let my money works for me instead of I work for money, then I reach financial independence. If I apply that philosophy to the whole population our economy would collapse? What is wrong with the reasoning? Where is the transition from good to bad? I am not arguing I am a layperson and need someone to guide me. Thanks folks for taking the time to respond.
Our fundamental upbringing says it is bad. But.... What is wrong with the concept if it keeps full employment, the economy humming, Social Security checks coming.....?
There are a few reasons why this reasoning is not complete (it's not wrong, but it's only one of the many parts of the narrative). Firstly, even on a human level, as you know, official finances don't completely describe one's situation. For instance, at a certain point in life, doctors commonly find themselves in a lot of debt. However, everyone is aware that these liabilities are offset by a particular intangible asset. Secondly, US finances do not constitute a perfectly closed system, especially nowadays when global trade and financial linkages are such a significant factor. This makes calculations tricky. For instance, take Apple. It issues debt in the US, due to the US capital mkts being deep and extremely liquid. However, as I'm sure you've heard, a lot of its cashflows, both past, present and future, will appear outside of the US. Does that mean that Apple isn't financially sound as a company? Thirdly, in global macro, there are all sorts of political considerations that have to be taken into account. For instance, China/US and Germany/PIIGS are examples of non-economic forces creating great imbalances and distortions in the name of social progress. You could argue that at least the former was largely successful.