Exjackly

We hear about the federal debt and deficit on a regular basis. Yet, what do those Billions and Trillions of dollars mean to us? What can we do about it? What does it do to us? Does it really matter?

I am here to tell you that it does matter. Those dollars have a big impact on us in many different ways.  In their own way, they are a invisible force pushing the economy in directions it would not ordinarily go.  This is largely for two reasons: the government is huge and its driving force is not economic or material efficiency.

For starters, the US government is so large, that our annual taxes are not enough to pay for it all.  This leads to continual borrowing.  The borrowing increases the future budgets because of the increased amount of interest the government has to pay.  This is bad because not only does it lead to larger budgets for the future, but it gives our government less flexibility to respond to a true disaster.

Additionally, the government borrowing makes it more expensive for us to borrow money.  This is because there are a huge number of individuals, companies, and countries that are willing to loan our government money because they know they will get paid back.  Every dollar the US government borrows is a dollar that is no longer available for us to leverage towards buying a home, building a business, or develop something new.

Government spending also leads to decreased economic growth and employment.  This ties back to the efficiency goal mentioned earlier.  Since the government is not motivated by profit (aka efficiency) it is free to spend money in wasteful ways that do not contribute to the economic engine which drives this country and the world.  While this is not a problem when the money is being spent on basic services that the government should be providing, it is a big problem when the spending is being spent on activities and services the private sector can meet better.

This last item is the one that you and I probably notice the most however.  The more money the US government spends, the more US dollars there are out in the world.  The more dollars there are however does not translate into more goods and services to be bought with those dollars.  So, more money chasing after the same goods and services.  What does that do?  It causes inflation.  So, due to increased government spending, you and I are finding that we need more and more money each year just to stay in place.

My conclusion?  We need to do our best to convince out representation in Washington, DC that we would rather have money not spent than to see it wasted by the government.  Even if that waste is pork barrel spending in our districts.  That is a negative sum game.  Everybody wins if there is no pork barrel spending as opposed to just a few hand-picked winners from Congress.  Even on necessary spending, anything we can do encourage Washington to keep it down or find ways to eliminate spending is effort well spent.