<p>The concept makes more sense when you consider taxation and how that plays into the national debt. For example, if the government intends to spend 100 dollars, and only collects 50 dollars in taxes, the government has a deficit of 50 dollars. If the government does the exact same thing the next year, it has another deficit of 50 dollars. That brings the total national debt to 100 dollars. It makes even more sense when you consider the fact that the government can issue bonds to fund whatever it did not collect in taxes. A central bank can also buy bonds from bond holders if it wants to expand the money supply (stimulus), and allow the government to potentially spend more money that it does not collect directly from taxation. </p>

<p>I know that this is a simplified model, but it explains the broader concept, that whatever a government does not collect in taxes, it must borrow. When it borrows, it must repay. When it has liabilities to repay, we can call that debt. When it does not want to raise taxes to repay those liabilities, the federal reserve can step in and buy bonds which increases the money supply, and can create an inflationary scenario. </p>

CC BY-SA 3.0
2018-04-18T03:01:29.573Z
2018-04-18T03:01:29.573Z
Simeon Ikudabo
<p>I can't get my head around the concept.<br>
<a href="https://economics.stackexchange.com/questions/20930/how-does-national-debt-work">This question</a> didn't help much either.<br>
Could you please explain what it really means? and why is it bad to pay it off and have zero national debt?<br>
Thanks.</p>

<macroeconomics>
What does national debt really mean? and why is it bad to pay it off?
Sam
# What does national debt really mean? and why is it bad to pay it off?

(Asked by: username_0 on 2018-04-17)

I can't get my head around the concept.  
[This question](https://economics.stackexchange.com/questions/20930/how-does-national-debt-work) didn't help much either.  
Could you please explain what it really means? and why is it bad to pay it off and have zero national debt?  
Thanks.

**Tags:** macroeconomics


---

## 1 answers

### Answer by username_1 on 2018-04-18. Score: 1

The concept makes more sense when you consider taxation and how that plays into the national debt. For example, if the government intends to spend 100 dollars, and only collects 50 dollars in taxes, the government has a deficit of 50 dollars. If the government does the exact same thing the next year, it has another deficit of 50 dollars. That brings the total national debt to 100 dollars. It makes even more sense when you consider the fact that the government can issue bonds to fund whatever it did not collect in taxes. A central bank can also buy bonds from bond holders if it wants to expand the money supply (stimulus), and allow the government to potentially spend more money that it does not collect directly from taxation.

I know that this is a simplified model, but it explains the broader concept, that whatever a government does not collect in taxes, it must borrow. When it borrows, it must repay. When it has liabilities to repay, we can call that debt. When it does not want to raise taxes to repay those liabilities, the federal reserve can step in and buy bonds which increases the money supply, and can create an inflationary scenario.


---

