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Source link: http://archive.mises.org/9233/govnt-stimulus-means-more-debt-burdens-come/

Govn’t Stimulus Means More Debt Burdens Come

January 14, 2009 by

According to the Congressional Budget Office, this Federal fiscal year will see a budget deficit of $1.2 trillion. And that is not counting what will be borrowed to cover the $775 billion “stimulus” package soon to be passed by Congress and signed by our in-coming president.

Since the beginning of this decade, the Federal debt has grown from over $5 trillion to more than $10 trillion. The two-year stimulus package and “regular” government spending will likely add another $3 trillion to the Federal government’s debt before the end of Obama’s first term.

Already, the Federal debt is equal to a per capita burden of $33,000 for every man, woman and child in America, and a $72,000 per capita burden for the American taxpaying segment of the population.

But we should not forget that whatever future tax burden this additional borrowing may place on the American people, all that the government spends with borrowed dollars comes out of current production and redirected labor and resources into government-chosen activities.

Borrowing never shifts the cost of government to the future. Today’s citizens bear the full burden of all that Leviathan does.

I discuss this and the actual dollar figures in a new piece of mine on, “Government Stimulus Means Growing Federal Debt Burdens to Come.

Richard Ebeling

{ 2 comments }

Stanley Pinchak January 14, 2009 at 2:04 pm

It is sad that so many who are unfamiliar with Bastiat do not understand that the purchase of state bonds is such a counterproductive action. The purchaser only sees the immediate benefit of a virtually risk free return on their investment. They don’t see the effect that their funding has on the growth of the state, the effect on the market of this misdirection of capital to the state, nor of the long run sclerosis that such “investment” portends for the market.

The more that articles such as this one reinforce the lessons taught by Mises, Rothbard and others, the better. They provide the real life examples which flesh out the logical deductions of theory. The sad fact remains that governmental intervention by increasing time preferences and corrupting morals reduces the population of educated laypersons who can express the error of governmental spending. The very spending of government and its financing through means other than direct taxation lead to a situation where market forces that typically direct self interested action to the good of society as a whole lead instead to the increase of the state.

In our hampered conditions, often, the best means of protection against monetary manipulation is through the purchase of government bonds. Traditional protections are not accorded legal standing, or their contracts are permitted to be violated at the discretion of the party with fewer scruples. Under the absence of the rule of law, how effectively may the market operate? Obviously, it flounders, and all the more as further insults and injuries are compounded upon it by the state and its intellectual class.

May debt repudiation come swiftly and may it forever serve as a warning to the dangers of making deals with the devil.

Ralph Musgrave September 5, 2010 at 9:27 am

It is complete nonsense to suggest, as the above article does, that more stimulus necessarily involves more debt. As numerous leading economists have pointed out, additional stimulus can perfectly well be brought about with NO extra debt (AND without cutting interest rates). Keynes made this point, as did Milton Friedman as did the Nobel Prize winning economist William Vickrey.
The way to bring extra stimulus with no extra debt is obvious to anyone with an intuitive grasp of economics (that’s about 5% of economists). Those without this grasp might like to look at Friedman’s paper on this subject: http://www.jstor.org/pss/1810624
As for Keynes, see his letter to Roosevelt: http://www.scribd.com/doc/33886843/Keynes-NYT-Dec-31-1933 (See 5th para in particular).

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