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Does National Debt Really Matter?

Deficit reduction in a depressed economy is the road not to recovery, but to contraction, says British political economist Robert Skidelsky. He argues that current efforts to repay debt are misguided.

What’s the Latest Development?

America is undergoing large budget cuts while Europe negotiates to prevent Greece’s default. It seems every industrialized nation agrees that paying down its national debt is imperative.The logic goes like this: Paying off debt today will allow the country to borrow at lower rates in the future, meaning private investors will also be able to borrow more easily. The desired effect, of course, is increased economic growth. But the argument depends on a false analogy, says British political economist Robert Skidelsky.

What’s the Big Idea?

Nations who owe money to other nations, or to private banks, do not need to operate like a family with a credit card, says Skidelsky. He warns that doing so will only bring about more economic woe. For a family, it is illegal to print money. Not so for a nation. And decreasing spending now puts a burden on future generations by depriving them of important investments in education and infrastructure. Politicians worried about the political impacts of debt should also be concerned about the social impact of austeritynamely, revolution.

Photo credit: Donald R. Swartz/


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