Debt driven government spending is like taking things off the shelve at the store and not having to pay for it. Well in some abstract theoretical sense the
Federal government tax payers, do have to pay for the spending but since the debt is being pushed out ad infinitum, then lets be honest we really we do not. Watch this video, although it is about something else the point is made.
Everyone is watching and letting others get away with it. It is unfair. It is, what it is, steeling from honest people and business without paying for it. The Federal Debt is a perpetuity, that is an annuity that has no end, as debt is rolled over.
Why the debt affects the economy?
- Crowding out effect – Which is a reduction in private consumption and investment that occurs because of an increase in government borrowing. When the government borrows, this decreases available funds that entrepreneurs could use for business as well as disposable income consumers have for themselves. It results in higher interests for borrowing for the private sector. Aggregatae demand is stuck at a lower level. So even if the government does pay back the debt it does not come without cost. This is contrary to Keynesian thinking. But as we know now Keynes was wrong about most everything in economic and worse had an influence on the political process.
- Government spending does not help out the poor – Look at Greece for example. A small country of 12 million people got billions and billions of EU bailouts. If that money was given directly to the people each person would get a lot of money I do not know like a few hundred thousand dollars each) and they could spend it to stimulate the economy. But instead the common people in Greece are complaining it was stolen by government officials. This is partially true. I was there. Greek people are poor, except the ones that have large houses and yachts usually with government connections. In the USA you can say it is something different but it is not. Large business who have the special interest and it is a form of feudalism.
- I know people in the public sector – Not one would I hire personally.
I hope that the debt ceiling is not raised. Either steep real cuts in government spending, like 50% or the government should default. I know this is crazy talk and it is. But government spending and the federal debt is steeling from the poor and giving to the rich.
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