Deficits and Interest Rates Once Again.
Ah. Here’s what’s going on:
[Semi-Daily Journal]
Okay, this is a very useful article and provides a background for the graph below. See, Bush’s accountants are saying that there will be a $200 billion deficit this year but, somehow, miraculously, it will completely disappear next year. That way they can argue that deficits will have no effect on the economy. But, if you never repay that deficit back, and just let your repayment schedule return to normal, it will have a large effect on the economy. Very disingenious. It is like my credit card. Say I owe $1000 and pay back $20 a month. Then I spend $100. If I pay $120 the next month, there will not be much harm and I’ll pay off my debt about as fast as I normally would. But if I still pay back $20 and my debt is now $1100, it will take me a lot longer to pay it off and I will end up paying a lot more in interest, money I could have spent on useful things. Bush’s economists tacitly argues the first, without providing any clue how we will come up with more money (I guess magic does happen.) This is fiscal responsibility?