Deficits, Debt, and Depressions

Imagine that you or your family were going through hard times. Perhaps someone in the family is unemployed and looking for work. You have some limited resources that you want to put to best use. What do you do?

Do you put those funds into your mortgage, lowering your long-term debt, and perhaps reducing your loan term? Or do you invest in something that will help you find a job, perhaps take some classes, gain certification or skills, perhaps buy a new suit, hire a career coach, while at the same time looking to see where you can cut back on expenses?

Most likely you would do the second. Doing the first would reduce your debt, but would have no effect on your improving your current financial circumstances. The same is true for the national economy. Most legitimate economists recommend paying down debt in good times, and investing in and stimulating the economy in hard times.

And yet there are those who constantly push for reducing the debt at the expense of middle class programs and stimulus. Why? Just as in the example above, where the only one who will immediately benefit is the mortgage company, national debt reduction improves credit ratings and returns on financial instruments, generally benefitting the wealthy the most immediately at the expense of others. 

Focusing on the debt for the benefit of the 1% instead of the welfare of the other 99% is what plunged the US into the first Republican Great Depression. Let’s not make the same mistake again.

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