Feb 10 2009
Debt Flows Without Lobbying
I’ve said previously that “special interests” are people who want something you oppose. As the world economy continues to founder, most theories to bolster the economic system involve increasing debt.
One side typically wants to increase government spending. The hope is that, since the private sector either can’t or won’t muster the needed demand for goods and services, an outlay of public money will create more desire to hire people, greater want to expand businesses and increased effort to build industries.
The other side usually advocates tax cuts. The belief is that individuals can best spend their money. Rather than having faraway government bureaucrats decide what to do with a large pot of cash, knowing some of it will be wasted and lost, it’s better to let a lone entrepreneur start a company. Better to let a family choose how to spend money instead of being steered certain ways in the form of tax incentives.
Both schools of thoughts put debt on the back burner. Mostly because constituents want money. Either in lower tax bills or in more programs. Repaying debt does neither.
A clean balance sheet means happy creditors and a strong credit rating. It does not mean items to which a politician can point during a re-election bid. Posing near a new factory or with workers who now pay less in taxes make better photo-ops.
Sure, both arguments have some merit. The hard part is finding the right mix at the right time to combat stagnating financial systems. All the while knowing the bill will eventually come due.
Debt needs to be brought to the front burner. I doubt China is in much of a mood to keep investing in our debt.