Quote:
Originally Posted by donquixote99
I don't know how much debt the economy can carry. The question seems to raise a lot of argument. But out of an abundance of caution, I would make the goal to be debt growth on average equal to the rate of revenue growth, so that debt service as a % of GDP becomes constant.
As I noted before, there's plenty of space in the economy, compared to others, for increasing taxation, if we really wanted to erase the deficit and work on reducing the debt we could do it. It would get easier and easier to do it, once we got started, as the economy grew while the debt did not.
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Your first paragraph appears to describe a scenario where debt is never retired, and allowed to grow proportionately to revenue.
The way the Federal Gov't works, as a general rule, spending increases each year in the budgeting process thanks to the Fed's use of
baseline budgeting. Just by virtue of the budgeting processes, a spending increase is "assumed" into the budgeting process each year.
Bottom line - the Fed leads with an assumption in spending increases each year. It then traditionally overspends the increased budgeted spending amount each year. That's a level of fiscal irresponsibility that is reserved only for those organizations that can print their own money.
This is why your second point that "there's plenty of room for additional taxation" is, to me, analogous to giving the alcoholic another shot of bourbon. It's not sustainable to fix a system where spending over the budget is rewarded by more money to spend.