Excessive Debt: The Consequences
Excessive debt is never a good thing. This applies to a family, a business, and even a nation. At some point, the interest on the debt will become an unsustainable part of the budget and unless other government services are reduced, the debt will begin to grow rapidly. In addition, taxes will need to be raised to pay the debt. Of course, the higher the tax bite, the lower the growth in the private sector. Since the private sector is the growth engine of an economy, our economy will slow. When the economy slows, tax revenue will decline which will become a self-perpetuating cycle with a rather negative epilogue. There is also a relationship between high levels of government debt and unusually high interest rates. However, this is currently stalled due to excessive monetary policy. When this relationship resumes, and interest rates spike, the government budget will be burdened far beyond what we might imagine.
The increase in debt is an unsustainable path to economic growth. In short, the crisis of 2008 emerged as a result of excessive debt. Now, we are trying to solve a crisis of excess debt with more debt. Many economists believe this is untenable.
source: Forbes (http://www.forbes.com/sites/mikepatton/2014/12/29/the-u-s-debt-continues-to-climb/)
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