Question

1. What are the LONG TERM HARMS imposed upon our economy and our society by our government’s policy of borrowing over $500 billion each year (in 2020 dollars) every year—well, almost every year -- since 1982? That is, what are the MANY, SEVERE HARMS CAUSED BY THE DEFICIT? Please discuss at least ten harms.
2. Please rank each of these many, severe harms from “MOST” harmful, in your opinion, to “LEAST” harmful, in your opinion, and defend your ranking system.
3. Which groups in our economy are “hurt the most” by this yearly deficit? Which groups are “hurt the least”? For example, let’s say that I am an old college professor living in a house that is paid for, free and clear. Compare me to a 20 year old college student just starting out in life. In theory, who is harmed more by this yearly deficit? Why?

Answer 1

Long term harms by high government borrowing in rank order.

1. Very high borrowing raises interest rates.

2. High interest rates discourage government and consumer spending.

3. It leads to less economic growth

4. Leads to more unemployment.

5. High spending on interest payments.

6. High interest payments lead to less spending on health and education

7. It causes less human capital

8. It leads to reduced long term growth.

9. Country is stuck in debt cycle.

10. Reduced credit ratings for acountry attracts less investments.

It is clear that high deficit funded by debts leads to a cycle which keeps repeating. Steps of repetition may change but cycle remains the same.

People who receive unemployment benefits or transfer payments are better off as they receive money with no work.

Business people and jobseekers are hurt the most as pessimism causes both economicand social tensions.