The cautionary tale of our current fiscal spending is called the "crowding out effect". The Federal Government demands more bonds to finance their deficit and in turn the interest rates climb. This decreases private investment. (page 122 of our text) Greece has spend far more in terms of their deficit (and debt) as a percentage of GDP. This is the outcome.
In the United States we are also seeing this take place before our eyes. This is the latest evidence suggesting we are spending too much.
Subscribe to:
Post Comments (Atom)
Its interesting to see that Greece is in need of a bailout again. This isn't new, we loaned them a ton of money during the Cold War in the Truman Doctrine. I guess we can't help now because guess what? We're in deep as well.
ReplyDeletePoliticians need to bite the bullet and raise taxes and wean off of public works and benefits. It hurts them if they don't get reelected, but they won't get reelected if their economy is in the gutter. Even worse if they don't have a country. I guess its not as big of a deal when there isn't a common enemy to work against.