Deficits Favoritism

There was an editorial in one of the newspaper debating a case against reducing the deficit since we and the global economy is in such bad shape that if we don’t spend, the so called economy recovery will falter. It is not the first time this is being said and I have seen many economists and newspaper advocating or cautioning the various states (namely the U.S. and some European nations) not to cut spending but keep on spending till we are on sound economic recovery. Although I am not an economist, but I will beg to differ since how much debt a nation can take and what if the recovery is not big enough to pay down the debt. It is like spending by an individual during a year and taking on more debt in the hopes that he or she will get a bigger bonus and that can be used to wipe out the increased debt.

It is simply that we don’t have the resources to spend out of this massive debt; it is classical Keynesian theory that government should step in when the private sector would not. But with ever increasing debt, who will pay for all the interest accumulated on it.

Even if we have a fantastic recovery after this massive debt and don’t cut spending, how we are going to pay for all the spending in the future, it can only be done by increased taxes (which nobody likes). So right now is the right time to cut spending lest people and politicians get used to increased debt and spending without having the means to pay it back without painful solutions.