How the Deficit Depresses Our Economy
April 4, 2011 Leave a comment
The political class insists that we can’t cut our massive, $1,600,000,000,000 Federal deficit, because it would depress the economy and cost jobs. Their excuse is that the private economy is not creating jobs and wealth, so the government must take up the slack.
But what mysterious burden, on our economy, is preventing the basic private investment that creates wealth, allowing the economy to grow, jobs to be naturally created, all of us to prosper?
Ironically, it’s that very deficit.
It’s because of the way the deficit must be financed:
The government has to raise every penny of the deficit it spends, by issuing treasury notes, bonds, and so on. Private people buy these, imagining they are “investing” by doing so. But real investment creates wealth, while government securities just finance deficit spending, as a debt that will be paid back by your grandchildren, as gigantic tax burdens.
This year, the Federal government will have to convince people to “invest” 1.6 trillion dollars in government notes and bonds, to pay for its deficit. Every single penny of that would, otherwise, have been invested in private enterprise, to create wealth.
Imagine if the private economy got an “extra” trillion-plus dollars of investment, next year. The massive growth in wealth and jobs is almost unimaginable.
Now imagine if, instead, the private economy had a trillion-plus in investment REMOVED from it by government. The massive loss in growth and jobs is entirely imaginable, because it’s what we’ve been suffering since the deficit increased almost one trillion dollars in 2009.
Every dollar the government spends steals one dollar from the private economy…either directly, by taking it through taxes, or indirectly, by financing it through a bond or note that steals that dollar from private investment.