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Good or Bad Debt?

Written by Kerby Anderson August 22 - 2016
Those of us concerned about the rising national debt often have trouble convincing others about the problem because of news articles and commentaries that minimize our concerns. A good example would be a recent New York Times column by Paul Krugman with the title: “Debt is Good.” Well, I guess that settles it. He is an economist with a Noble Prize to his credit. If he doesn’t think the national debt is a problem, then I guess none of us should be concerned. Fortunately, John Goodman was willing to take on the issue and explain the debt is not good. Paul Krugman argues that “issuing debt is a way to pay for useful things, and we should do more of that when the price is right. The United States suffers obvious deficiencies in roads, rails, water systems and more; meanwhile, the federal government can borrow at historically low interest rates.” That is a good point; though I would rather we paid for these important improvements with a balanced budget. John Goodman says there is a problem with that analysis. “Going forward, we are not going to be borrowing money in order to invest in projects that will produce social services far into the future. We are going to be borrowing money to pay for current consumption.” Think of debt in your personal life. Borrowing money to fix up your house in probably a good investment, especially if you can some day sell your house for more. That is very different from borrowing money by using your credit card so that you can go to fancy restaurants and buy expensive meals. Most of our debt in the future will be to pay for entitlement programs where “we have promised more than we can afford given expected taxes and premiums.” Our current obligations are over $100 trillion dollars. We don’t have $100 trillion in the bank earning interest. When you look at it this way, you can see that our national debt and our future obligations are not good. Viewpoints by Kerby Anderson

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