1) Yes, "If we were a business, it would be considered sound policy to go into debt for capital expenditures <assuming a good business plan, and a rational economic use for the capital expenditure>, rather than trying to pay as you go".... Leverage has it's purposes. BUT WE ARE A COUNTRY, NOT A BUSINESS. Borrowing great gobs of money to spend on - non capital investments like - transfer payments, farm subsidies, military spending that the Pentagon doesn't ask for but happens to fall in some Congressman's backyard, etc., etc., DECREASES THE ECONOMY'S POTENTIAL RATE OF GROWTH (because it diverts from private investment activity where the velocity of money is greater, and the contribution to the economy's productivity is higher).
2) Correct. The Soviets cooked their economic numbers for many years. But it is now well established that the under-performance of their economy relative to the Capitalist West's began many years ago. So, no, they didn't collapse all sudden and unexpected-like in the '80s. It wasn't because of Star Wars (although that explanation made for a very 'Hollywood-like' and cinematic explanation). |
