I sometime feel that debt crisis and measures to over come debts are very overrated.
US federal government recently passed law to which will require government to match spending dollar to dollar the amount they borrow.
I don’t agree with that in current time of economy. And I feel that currently is the best time to borrow more and to spend on infrastructure and other development projects. I agree that there are countless programs which needs spending cuts. But this isn’t the way to do that.
Currently, interest rates are very low if not lowest and US government can borrow at much lower rates.
For example, Suppose, If you are the owner of a big company and you are thriving to make a way through bad economy. What you would do?
1) Borrow more at low-interest rate and spend that wisely to improve financial condition of the company.
2) Stop/reduce borrowing. Start spending cuts. Shred new projects. Lay-off employees.
I’ll definitely choose option one. I’ll borrow more and put my money on the projects which will generate more revenue in future. That doesn’t mean you don’t have to pay attention on spending. You need to cut spending wherever and whenever needed, but wisely.
There are lots of government projects which needs spending cuts. US is spending way too much in trying to become global police. Iraq, Afghanistan and other wars are costing too much to tax payers.
Check this out:
- Defense budget of US for the year 2010: $698 billion, which 4.7% of 2009 GDP.
- Defense budget of India for the year 2010: $36 billion, which 1.8% of 2009 GDP.
- Defense budget of Pakistan for the year 2010: $6.4 billion, which 2.8% of 2009 GDP.
- Defense budget of China for the year 2010: $114 billion, which 2.2% of 2009 GDP.
- Total budget of India for the year 2011: $273.4 billion