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Updated: February 24, 2014 1:08PM
National debt is
obstacle to growth
In America there is a belief that government spending strengthens the economy. But as a result of deficit spending by the government and its inflationary monetary policy, the average citizen now has a negative savings rate.
The U.S. federal government paid $220 billion tax dollars on interest payments for the debt in 2012. As spending increases, ultimately taxes will have to increase to make the giant debt payments.
Also, the Federal Reserve website says it implements policy to maintain an inflation rate of 2 percent annually. For example, if you had $10,000 in the bank from Jan. 1, 2013 to Dec. 31, 2013, the government’s 2-percent inflation rate will only allow you to buy what $9,800 purchased a year earlier. Over the course of five years, you would have lost $1000 in purchasing power. Sadly, according to Free Market Economist Peter Schiff the real rate of inflation is actually around 7 percent. If you don’t know who to believe, look at the cost of war, healthcare, and education then decide who’s telling the truth.
By encouraging savings there would be capital accumulation, allowing labor to be more productive, resulting in greater economic output. Resources would be diverted away from government and service jobs, towards industries in the productive sector. Soon American could once again have an economy that saved, produced, and created wealth.