The Problem Is Spending, not Deficits
Posted by Daniel J. Mitchell
Reckless spending increases under both Bush and Obama have resulted in unprecedented deficits. Congress will soon be forced to increase the nation’s debt limit by an astounding $1.8 trillion. Government borrowing has become such a big issue that some politicians are proposing a deficit reduction commission, which may mean they are like alcoholics trying for a self-imposed intervention.
But all this fretting about deficits and debt is misplaced. Government borrowing is a bad thing, of course, but this video explains that the real problem is excessive government spending.
Deficits are Bad, but the Real Problem is Spending
youtube.com
Fixating on the deficit allows politicians to pull a bait and switch, since they can raise taxes, claim they are solving the problem, when all they are doing is replacing debt-financed spending with tax-financed spending. At best, that’s merely taking a different route to the wrong destination. The more likely result is that the tax increases will weaken the economy, further exacerbating America’s fiscal position.
cato-at-liberty.org
I agree the core problem is spending, but I think the guy in the video seems overly sanguine about the problem of large deficits that aren't financed by inflation. Deficits, even moderately large deficits, are not necessarily a huge problem (which isn't the same as saying they are perfectly ok, I'm not calling for them), but the type of deficits we seem to be headed towards probably are. Yes even larger deficits (as a percentage of GDP) in WWII where handled ok after the war was over, but "handled ok" doesn't mean zero cost or problems, and also the main reason they could be handled ok is that all the spending which pushed the high deficits, was for a war, a temporary thing, not for the entitlement programs that are taking control of the budget in modern times, and that theoretically can last for a very very long indefinite amount of time. |
