The irresponsible expansion of the budget to bail out state governments from their own budget deficits, expand Medicaid, boost education spending, food stamps and unemployment benefits, build federal buildings, provide more for public housing, construct climate change supercomputers, erect trade barriers overseas, create refundable tax credits, and make special interest payouts will not stimulate sustainable economic growth. Instead, the astronomical growth of government spending, coupled with further monetary easing and protectionism, will discourage investment, savings, and capital creation, because in the longer term it means higher taxes, higher interest rates, and inflation. It will destroy jobs in the private sector, thus increasing individual dependency on government. Importantly, it will steep American taxpayers ever deeper into a spiral of debt, now nearly $10.7 trillion. That includes $4.3 trillion owed in the form of unfunded obligations to Social Security, Medicare, and other commitments, and $6.4 trillion held privately, $3 trillion of which is held overseas. 40 percent of the debt held privately comes due this year. The only way for the government to pay it is to borrow yet more money.
As a result, the federal government is running the serious risk that it will default on its financial obligations, as the nation’s creditors during the current economic downturn may be unable to continue sustaining the uncontrolled growth of spending, leaving the nation in financial ruin.
America needs a plan now to begin paying down the national debt, not an ill-conceived scheme that will make that task impossible for our children and our children’s children. The nation needs to tighten its belt, and learn how to live on less credit, less borrowing, and less debt. This is a change that must occur at the individual level, at the county level, the state level, and the national level. It is not a change that should begin by doubling down on a hasty, careless gamble. Read more on the economic stimulus at CEI.org.
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