Saturday, August 13, 2011

Has The National Debt Killed The American Dream For The Next Generation?

The recent downgrading of the nations credit worthiness, by the credit rating agency Standard & Poors, has many more people thinking about the federal debt. It used to be something many of us didn't understand and didn't think we needed to be aware of. We worried that it might affect us with higher interest rates in the near term, though that hasn't happen yet. But today the threat has grown large enough that the future generations are going to have to pay for this debacle.

It reminds me of how I used to be in credit card debt. I went along casually spending and buying things over the years. Always thinking just a few more payments it would be paid off. But there always was that emergency like the car needing tires or repair work. The kids needing something. The washer or dryer breaking down. It was always something. The years passed and the payments on the credit cards were so much I couldn't pay my regular bills. It was a scary time with 3 kids, a wife, and a big mortgage. I was worried my kids would have to do with less because of my mess.

This is how I relate to the current debt crisis. To much free spending, all being borrowed and not seeing ahead to the future. Like me, the government has reached it's tipping point where something has to be done. But the government's problems are much larger and the family affected, is not three kids like I had, but 250 million people.

The solution to this incredible problem is to cutback spending and pay down debt. It's simplistic and many people, smarter than me claim that it's OK for the government to have debt. But wouldn't we be better off if the Federal budget was smaller, so Washington needed less of our money to function. The other side of the coin is to raise taxes. It should be on the table if necessary but lets try cutting back spending and see what the results are.

It hasn't occurred yet, but all this money printing and borrowing economists claim, is inflationary. I agree with that because I have been to the supermarket and the gas station, prices are rising. This is one of my concerns for the future generations. Basic costs of food, fuel and goods are rising. The electric bill, water bill, and other necessities are increasing. All these basic needs are competing for the dollars from your paycheck.

What other problems will arise from the debt crisis? Will interest rates go up so the interest for future borrowing will be even costlier. State and local governments have debts to pay also. If their interest rates rise, won't we have to pay more taxes. Between Federal and State governments, taxes are definitely going to go up, taking more from peoples budgets.

We can be sure that the governments free spending will be paid for by future generations. There will be higher taxes eventually taking more money from their families budget. It seems to me we are moving towards a time where the next generation will be burdened with the problems of the current generation. If you factor in the future problems with Social Security and state pensions, the problems are much worse. I am afraid we have dug a large hole that our children and their children will have to clean up.

I hope the days of this massive borrowing is over but I am afraid it may not be. I read Paul Krugman's column titled "The Hijacked Crisis" in today's New York Times Online. The article was a typical Paul Krugman column, but something he wrote at the end worried me and I wondered if this comment, was the general theory of the current administration in Washington. Here is an excerpt from his August 12 column:
"What would a real response to our problems involve? First of all, it would involve more, not less, government spending for the time being — with mass unemployment and incredibly low borrowing costs, we should be rebuilding our schools, our roads, our water systems and more. It would involve aggressive moves to reduce household debt via mortgage forgiveness and refinancing. And it would involve an all-out effort by the Federal Reserve to get the economy moving, with the deliberate goal of generating higher inflation to help alleviate debt problems."
        Paul Krugman, New York Times, "The Hijacked Crisis"


Paul Krugman has a PH.d in Economics, he should be the one knowledgeable in getting the country back on track. It seems to make sense, but to do it would mean another larger stimulus plan with more debt. This kind of thinking just seems wrong.

All these decisions of what to do about the economy must be put in perspective of how it will affect future generations and not just today.

What are your thoughts?



3 comments:

  1. I think Krugman has ceased to be a serious economist anymore and is something more akin to a political cheerleader for the left and totalitarianism. His column in the NYT grows more ridiculous over time and his prescriptions for recovery sound closer to a Soviet 5-year plan than free-market capitalism. In his mind there is no problem that government can't solve by spending money, the only limitation is a lack of funding.

    ReplyDelete
  2. I marvel at how entrenched Krugman is in his views. He actually feels the government should have another stimulus package, but only bigger. This guy has the education but can't see when his beliefs don't work.
    Economics is not an exact science. It doesn't always work. With all the 1,000,000's variables the US economy has, how could anyone figure it out and believe they have the answer.

    ReplyDelete
  3. Believe it or not, Krugman won the Nobel Prize for Economics.

    ReplyDelete


Join 1000's of People Following 50 Plus Finance
Real Time Web Analytics