The National Debt Good or Bad?

In the beginning the Government only generated deficits during the War of 1812, the recession of 1837, the Civil War, the depression of the 1890s, and World War I. But, as soon as the war ended the deficit would be eliminated and the economy which was much larger than the amounted debt would quickly absorb it. But the Federal spending has grown over the years, especially starting in the 1930s in actual dollars and in proportion to the economy. President Roosevelt sought to use the full powers of his office to end the Great Depression. He and Congress greatly expanded Federal programs. Federal spending, which totaled less than $4 billion in 1931, went up to nearly $7 billion in 1934 and to over $8 billion in 1936. Then, U.S. entry into World War II sent annual Federal spending soaring to over $91 billion by 1944. Thus began the ever-increasing debt o

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Debt should not be a problem because we can just borrow more, right? This would be correct if we could borrow an unlimited amount of money, but it is not. Defense spending produces little or nothing except in times of war. Internal debts can be paid with increased taxes, inflation, and other monetary controls the government has but external debts can extremely damaging to a country if it cannot buy enough of the foreign currency to pay the interest. Deficit dollars then translate into demand for goods that aren’t being produced. If deficit spending eliminates non-productivity then its direct monetary cost will be offset if not surpassed by increased productivity. The government did this by selling bonds to the private sectors essentially reallocating its own countries funds to spend on its country. For example in the 1980’s when the huge deficits were adding up the actual additions to the public capital or increased productivity were often as big, or bigger than the deficit.

What about allowing the government to run a deficit and avoid the negative aspects of inflation. This depreciation of the dollar counters the cost of the deficit but destroys the purchasing power of the dollar. should attempt to reduce its deficit but eliminating it is not necessary and could do more damage than good. As a result, the national debt grew in size after 1980; growing from $709 billion to $3. Attracted by high interest rates and stability, foreigners now buy huge amounts of U. If there is no deficit and the curve shifts to the right then supplies will not increase and the country will no longer be operating on the curve.

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Approximate Word count = 1050
Approximate Pages = 4 (250 words per page double spaced)

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