The Real Cliff | The Weekly Standard: "These principles embody America’s de facto fiscal policy since the early 1960s: continuous government borrowing to pay for current consumption. That policy was, in the first instance, an unintended consequence of Keynesianism, which proposed that government shore up aggregate demand by spending more than it taxed during economic downturns.
Previously, government borrowing had been mainly for investments to secure or improve the future—expenditures appropriately shared with future generations. These included not only physical infrastructure such as roads and water systems but also wars (almost always debt-financed) and national expansion (Jefferson purchased the Louisiana territory mainly with Treasury bonds, which Napoleon promptly sold at a discount).
Keynes introduced the idea that government could legitimately borrow not only for production but also for consumption. Just as a creditworthy individual may take out a mortgage to purchase a home with future earnings, so government could borrow a share of tomorrow’s wealth to meet urgent current needs. There had always been cases, such as natural disasters, in which governments had spent liberally, and if necessary by borrowing, to sustain incomes in the face of widespread emergency losses. Writing in the 1930s, Keynes in effect generalized the proposition to encompass economic emergencies of the magnitude of the Great Depression. His postwar apostles made refinements—such as “countercyclical stabilization” and “the full-employment balanced budget”—to moderate more routine fluctuations in the business cycle."
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