A Stimulus to Bury our Kids in Debt

With the credit crisis crippling the global economy, governments are spending like drunken sailors to stabilize the financial system and spur growth once again using Keynesian policies. The United States especially has approved a giant fiscal stimulus, tax cuts and bail-outs that is increasing public debt. The crisis demand action but the problem is that (see IMF chart above) that government debt of rich countries is set to grow from 83.3% of GDP in 2008 to almost 100% in 2010. With aging populations and costly entitlements system these action may spell disaster. In addition while politicians talk about crisis and the majority of economists support the stimulus, some economists are against because government is not able to spend a dollar in a way that it generates a dollar or more in value. In addition for every dollar that the government takes out of the private sector is a dollar the private sector doesn’t have to spend anymore. The key problem here is that in order to finance all this spending, the government has either to raise taxes or print more money which creates inflation and can cause great harm to the average consumer and will place a huge burden on future generations. In other words, new president, same spending policies designed to bury our kids in debt. [On this subject see Stossel's video on Bailouts]