I don't have a fundamental issue with government spending in order to stimulate a lagging economy.
Does that surprise you?
My problem is that increased government spending:
1) Almost always becomes the new 'norm', even when it is no longer needed.
2) Is usually spent inefficiently.
3) Can be more harmful when government debt is already extremely high.
#3 is perhaps the most important. Debt has a point of no return, where increasing it puts you over the edge where you will never again be able to pay it off, and will eventually have to default. I worry about interest rates rising, and the increased interest payments we might have to start paying in just a few short years... if rates went up a few percentage points, we could see our interest explode to 20% of the budget in 10-20 years, or more... it's a scary cliff to be walking along the edge of.
How can we predict where any nation will be in 10-20 years, with the global economy so volatile?
Perhaps we will be able to refi our debt (?)
Perhaps we can ask for debt forgiveness (?)
I don't want to sound short-sighted, but the looming cliff seems bigger and more precipitous than the cliff in the distance.
With all of our current plans, we are going to increase our debt as a % of GDP for quite some time.
When recovery starts, we will likely see increases in rates.
The problem is, most of our debts are held between 5-15 years, then we have to pay them off or renew them. Since we cant pay them off we have to renew, but when rates go up we will have to pay higher rates.
The more we pay into interest, the more likely our interest payments will continue to increase. We could easily see 10-20% of our revenues going into interest payments... that is much worse a threat than this recession was.
Should not the emphasis be on increasing our GDP -- substantially??
Not if the increase is based on borrowing,
Can you balance your credit cards by constantly opening new lines of credit?
See the problem?
I can't be overdrawn.
I still have checks left!
I meant, increase GDP by actually increasing domestic productivity. As in "real" increases in jobs.
But you knew that.
Yup, that would be good.
Cut the corporate tax rate to 0... that would boost our GDP like crazy.
Nope, as I have said before you seem like a reasonable guy and stimulus spending working is just economic fact, of course like all things it can be overdone. Stimulus spending has been used by Rs and Ds alike for decades, it's no coincidence that the national debt tripled under Reagan.
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