Sunday, November 20, 2011

Credit, Deficit Super Committee, and You

Do you know what would have happen if we followed a federal balanced budget amendment?  We would all be speaking German.  Deficit spending allowed the federal government to finance World War II by selling “war bonds.”  Our nation’s monetary policy allows the government to borrow (by selling bonds) to finance necessities and to smooth out the ups and downs of natural business cycles.

The deficit Super Committee deadline is Monday, November 21st, 2011. As the committee meets, I hope they are listening to some of those in the 1% who say they would not mind paying their fair share in taxes. I hope they listen to the 99% who want to see fairness in the tax system. I hope they listen to the majority of economist who say we should be borrowing and investing in infrastructure.

Let’s think about it for a minute. We borrow money to fix our roads, bridges, schools, and dare I say, Internet, so all would have access to the World Wide Web via high speed connection.  We bridge the digital divide and make a path for easier access to education for everyone. We put people to work.  It’s a simple equation; the more people who are employed, the more tax revenue the government receives and the less that is spent in social programs.  The more people unemployed, the more the government spends on social programs and the less tax revenue it has coming in.

Interest rates are at an all-time low, which makes borrowing for the government (and for you) very inexpensive.  It is okay, and maybe even a good idea to borrow money if it is for an investment that will have lasting returns.  Borrowing for a college education, a home, and even for the government to put people to work and get our economy going are good ideas.  It is important to look at the long-term vision and payback when considering taking on credit.  Does the Super Committee have the vision and the guts to make the right decisions?  For the health of our country, I hope so.

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