Is it morally acceptable to set the next generation(s) up with a crippling national debt?
Debate Rounds (3)
The [hard] truth of the matter is that no economy has ever grown under austerity and unless we want unemployment to stay permanently above 6% the government needs to take more action to stimulate the economy. The 09 stimulus narrowly avoided unemployment peaking at 12% but stopped 66% short at filling the spending gap (http://tinyurl.com...). In other words, it would be significantly harder to pay off $17 trillion of debt with 10% unemployment and a >1% annual growth of GDP than it would be to pay off $20 trillion of debt with 2% unemployment and a 3% annual growth in GDP. It is ironic that you claim a severe economic downturn is the way in which our children will be paying for our nation debt, when in fact contracting our fiscal policy further would greatly worsen the economic downturn in the long term.
Cutting government services and welfare is effectively lowering the wages and worsening the economic burden on 30-40% of Americans. This in turn lowers productivity and consumer spending while sparing those who gained from the financial collapse from having to clean up their own mess. One need look no further than Congress to see how the "champions of our future generations" are ransoming our government in exchange for defunding a program which would extend parental healthcare benefits to 20-24 year olds who are likely entering a volatile job market with crippling student debt. It should be obvious now that the Tea Party and modern libertarian movements are both backed mainly by a small number of wealthy individuals yet have managed to rally popular support for their draconian economic policies. It is again quite ironic that you suggest an increase in national spending is nationalized bribery when PACs and Citizens United (actual legalized bribery) are the only means by which the Tea Party has gained power.
Year 1: I get a new job. I get a paycheck. I develop a budget. I spend within that budget. All is well.
Year 2: I get a promotion (growth). I buy a gym membership and get a new car (spending).
Year 3: I get another promotion (more growth). I buy a large home (much more spending).
Year 4: No promotion (No growth). I buy a boat. I am now spending more than I earn.
Year 5: No Promotion (Still no growth). I buy a diamond encrusted toilet bowl (ridiculous spending). I go into debt. I max out all my credit cards.
Year 6: No Promotion (still no growth). I take out a loan to pay off my credit cards. My interest payment on my debt is now a large portion of my yearly spend.
Year 7: My wages get cut by 10% as a result of slow business at work (unemployment). I (magically) start a bank to constantly issue government-backed loans to help pay for my loan on the toilet bowl.
Year 8: I die and leave this legacy of massive debt to my children, and their children.
We now must reduce our debt obligation. Sell the toilet bowl.
Say you have a good job, own a house with a mortgage, and you are able to pay all your bills every month. Finances have been going pretty well, so you take some vacations, spoil the kids a bit, and maybe over-spend a little for a while. You're still ok because the bank thinks of you as a great customer and you always pay your bills on time.
Suddenly, BANG a pipe bursts and floods your basement. You can't afford to make the repairs immediately out of pocket, but when you check with the bank they tell you that because you're their best customer, you can get a line of credit at at almost zero interest rate to make the repairs so that the house gets back into good shape. After all, they've already loaned you money for the house so if you fix it up its better for them than if you let it get ruined. Have you been paying attention to what is happening in congress however? The projected losses from the shutdown can be expected to reflect in the GDP and stopping 800k recipients of social security or government paychecks is like putting a partial stopgap on the economy (http://tinyurl.com...).
Also while the public and private sector are heavily intertwined, the stock market (private sector) is by no measure "propping up" so much by the public sector that a decline in stimulus would mean an immediate collapse of the market. You also state that fundamentals suggest that "growth is an impossible solution to our problem" yet I place that burden of evidence on you. There is however much proof to the fact that measures of austerity can potentially kill our economy (http://tinyurl.com...). After all it was an expansion of the public sector (primarily brought on by the war effort) that lifted us out of the first great depression was it not?
We haven't just been over-spending a little, we've been overspending a ton. Since 2000 of the debt has increased at record levels. The national debt has increased from 6 Trillion (rounding up) in 2000 to 17 Trillion today. In the past 5 years our debt has gone from 11 Trillion to 17 Trillion. The rates are picking up. Taxes also have to pick up to cover. The tax burden will slow the economy.
RE: because you're their best customer, you can get a line of credit at at almost zero interest rate
S&P Downgraded The US debt in 2011, and we stand to see further downgrades without a sustainable budget in place. According to the S&P chairman as of this morning. The problem with your analogy is that the corresponding magnitude of the situation is far greater than a pipe burst. This has been a toxic pattern of spending the scale of which have never been seen.
RE: Also while the public and private sector are heavily intertwined, the stock market (private sector) is by no measure "propping up" so much by the public sector that a decline in stimulus would mean an immediate collapse of the market.
Our largest liabilities are (in order) Medicare (859 Billion/year), Social Security (812 Billion/year), Defense (607 Billion/year), Income Security (Unemployment, welfare, etc) (349 billion/year), INTEREST ON OUR DEBT (260 billion/year), Federal Pensions (must be nice) (229 billion/year).
The stock market does indeed fluctuate with every passing bit of news on quantitative easing (glorified money printing/stimulus). Why? Because all that "free money" gets pumped into the markets by the banks. When the faucet shuts off, panic ensues. FACT: We can't keep the stimulus up forever, but we are surely addicted to it insofar as we will experience withdrawal symptoms when it stops.
Finally, where would growth in the economy come from? True growth comes from production of which we do less and less.
http://tinyurl.com...). When Reagan and Bush increased spending however it was to funnel money into the pentagon or a war who funnels it into the high tech industry or defense contractors. When Obama is now trying to increase spending to offset the effects of the recession on middle class Americans he is totally vilified.
The S&P also downgraded Japan in 2002 even when they had >200% of their GDP worth of debt and it hardly had an effect on their economy, nor did it have an effect on the US economy in 2011. The S&P actually threatened to stop rating assets in certain states when state legislatures sought to curb the predatory lending of banks to families through regulations.
The fact of the matter is that again, cutting government services and welfare is effectively lowering the wages and worsening the economic burden on 30-40% of Americans. This in turn lowers productivity and consumer spending while sparing those who gained from the financial collapse from having to clean up their own mess.
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