S. citizens (including children) paying $9,600 to the government beyond their normal taxes to wipe our slate clean.
The enormous deficits and the ballooning debt sound ominous in terms of their size, but, remarkably, they have not had any obvious negative effects on our economy. When the Reagan era of deficits began in 1981, the U.S. economy plunged into its worst recession since the Great Depression. Between 1981 and 1983, the federal deficits averaged more than $120 billion per year, and yet the economy turned around. Since the economic turn around, we have had a record 78 months of continuous economic expansion. Within that period we have even survived the great stock market crash in history, in 1987. The way the country has been expand ing since the 1981-1983 recession paradoxically seems to indicate that deficits are beneficial to the economy.
Government deficits have two major effects on the economy: (1) they drain money from the limited supply of savings available for loans; and (2) they increase demand for goods. During a recession, businesses reduce the amount of money they borrow for investment because the prospects for a positive return on their investments are poor. This reduction in borrowing leaves a surplus of money which is available for the government to borrow. Government borrowing during this period is beneficial because it helps to keep interest rates from failing and dragging the economy into a deeper recession. With its newly borrowed money, the government is able to pay for products and labor. This increases the demand for products and labor. This increases the demand for goods via government purchases and the purchases of their employ ees. The increased demand helps to stimulate business production and to improve the health of the economy. This was exactly what helped the U.S. recover from the recession in the early 1980's. The increase in government spending and the large deficits during 1...