Tuesday, October 15, 2013

But we should also want to consider the ways a relentlessly rising level of debt could damage our economic prospects. The debt ceiling for the United States is currently set at $16.7 trillion. In 2000, the U.S. national debt stood at$5.7 trillion. The amount of the U.S. national debt is now roughly the same size as the annual output of the economy. Is this a problem?
Yes, suggests recent research by numerous macroeconomists. Specifically, they find that a big public debt “overhang” likely slows down future economic growth for more than two decades. In other words, excessive national debt racked up now will make future Americans considerably poorer than they would have been otherwise.
This is why the Keynesian idea, which was to borrow if necessary to create economic growth, and which by the way has never been proved to be true, is the ultimate drug for politicians.  In debt with slow growth?  Borrow more!  And spend more!  "What could go wrong" as they say.

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