The Myth of Deficit Spending

So, there is a common theme in political and media circles when it comes to deficit spending. They all like to say something along the lines of “they are making our kids and our grandkids pay for it” by pushing government spending beyond tax revenues. This insinuates some sort of a plan to pay for this debt that does not exist.

The government has almost always spent more than it brought in with taxes. This deficit spending, it tough economic times, has some economic rationale behind it. The idea goes that in lean years, government spends money to keep things afloat until growth starts back up. This is the half of the theory that is very popular with politicians. They all (with a couple of exceptions) like to spend money that did not previously exist. The other half of the theory is that in robust years, government raises taxes to cover some of their losses. Obviously this is not the popular side of this economic theory.

So politicians of all stripes are guilty of spending a lot of money then rallying around their pet demographic (Republicans like the “small businessperson” and Democrats like the “middle class family”) when the bill comes due and they need an excuse to keep taxes low. None of them, not in any piece of legislation that has ever passed, lay out exactly how the debts they run up will be paid off. And for the most part, they don’t talk about it either. If they do mention it, it is always framed in a particular way. Like they are going to “cut the deficit” (read “not go as far into debt”). Back in the late 90’s, when budget surpluses were actually forecasted (using overly optimistic economic estimates no one really believed) there was very little discussion about using the money to actually pay off some of the debt.

I want to take a few words to mention that the already existing debt which no one plans to pay off already costs the government hundreds of billions (100,000,000,000’s) every year. You see, rich people buy US Treasury securities and every year we have to pay them interest. The scary thing that could possibly happen some day is that rich people will stop buying these bonds or a whole bunch of people will want to cash them in – this sort of run on the bank would make the mess in the financial sector right now look like a cakewalk by comparison.

So government, in order to keep up the appearance of stability. Will continue to go deeper and deeper into debt and will never pay any of it off until it reaches a point at which it is completely bankrupt and can’t borrow another dime. That is the real plan. Whether or not anyone actually admits to it or not, that is what they are doing. The really fucked up thing is that most of them believe that they are actually doing it for you.

So next time you get a chance, thank your friendly politician for completely ruining any chance that your government has at a sustainable economic future. They are doing all they can for you, that will keep them in office. And they will postpone the inevitable cascade of fucked-dom that will unfold upon you in your future.

Fucked as I ever was,

Mike