On Thursday John Hinderaker at Power Line posted an article analyzing the experiences of other countries with previous debt problems to see which solutions worked and which solutions didn't work.
The Power Line article cites a report released by the Republican staff of the Senate Budget Committee. The introductory paragraph to that report reads as follows:
The federal debt held by the public has doubled, in nominal terms, in less than four years. It now stands at over 62 percent of GDP, the highest level since 1951. What costs does this place on our economy? With our fragile economy still suffering high unemployment, can we risk attempting to slow the accumulation of more debt by reducing government spending? This paper examines these questions by surveying the available literature and empirical evidence regarding the economic effects of government debt and spending reductions on economic growth.
The available evidence shows that:
1) a national debt crisis could result in economic collapse;
2) our high national debt already imposes sustained economic costs;
3) our growing debt can be slowed by immediate reductions in government spending;
4) reductions in federal spending, as part of successful fiscal consolidations, have demonstrably led to economic growth
5) fiscal consolidations focused on spending cuts are far more successful than those relying on tax increases and those that evenly combine tax increases and spending cuts.
The report also points out that the evidence gathered shows that the successful way to climb out of a growing deficit is with spending cuts rather than additional taxes.
One aspect of growing debt is the interest that needs to be paid on that debt. The article at Power Line posted the chart below:
This is the equivalent of paying the minimum balance on your credit cards every month as the credit card companies happily keep adding interest to your balance every month. It does not work in a household budget, and it does not work for the government.
Does anyone honestly believe that if more money flowed into Washington, that money would actually be used to pay down the deficit rather than to increase spending? There have already been rumblings that if Congress can cut the tax breaks given to oil corporations, that money will be given to 'green energy' companies. It won't be used to pay down the deficit, which is what we were told originally.
IT'S THE SPENDING, STUPID!!!!!!
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