What part of “THIS DEBT IS UNSUSTAINABLE!” isn’t clear? In the long run, and maybe the not-so-long run, annual trillion-plus dollar deficits will destroy the country’s economy. It’s not only incredibly inflationary, but it also mortgages our country’s future to those who hold the debt—in this case, the Chinese. Wonderful.
Editor’s response: The county faced greater proportionate debt after World War II and boomed thereafter.
The only thing the Chinese (or anyone else) can do with dollars is invest in the USA or buy our goods. This is another concept that isn’t self evident.
Let me try again to explain Keynesian economics, which deals with the unique situation of high unemployment.
If you had a choice of sitting home unemployed for three years running down your savings or going deeper into debt, or borrowing money to build yourself a house to keep gainfully employed during those three years, in which situation would you be better off in three years? With almost the same amount of debt or with a house with a mortgage on it?
Idleness is waste and adds to federal deficits through the social safety net. Work funded by deficits produces assets to offset the debt being incurred. And people gainfully employed have more money to spend, which generates work for others, known as the ‘multiplier effect.’ That is the essence of Keynesian economics.
A while back you said in passing that “we’re all Keynsian economists.” Well, we’re not. Huge deficits also result in unsustainable interest costs that drain off funds that might otherwise a) be used for constructive purposes, or b) be left in the hands of the taxpayers in order to generate and stimulate economic growth.
The debts being run up by the Obama administration and the socialist Pelosi/Reid Congress are structural, not temporary. They will not go away without a fundamental change.
Editor: True enough during times of regular high employment. But during a sharp recession they don’t drain off funds from taxpayers since they are not being taxed more, but rather less. When the nation returns to prosperity, taxes can be increased and historic rates of inflation can continue, thus lightening the debt load.
We must combat idle capacity and get people off the ‘dole’ (or worse) and back to work.