Call on our rich un­cle

Northwest Arkansas Democrat-Gazette - - VOICES -

My fam­ily is very for­tu­nate to have a rich un­cle who will loan us all the money we need to make in­vest­ments for our fu­ture. We can bor­row at very low in­ter­est rates now, and we never have to re­pay the loans; we just re­new the notes. Some mem­bers wrongly be­lieve that these notes will have to be paid.

My fam­ily is the United States of Amer­ica. Like any fam­ily, we in­vest in our fu­ture with bor­rowed money for ed­u­ca­tion, health care, in­fra­struc­ture, sci­en­tific re­search, etc. We haven’t been do­ing much of that lately. Tea­van­gel­i­cals are afraid of the debt. It is not the size of the debt, but the debt-to-GDP ra­tio that mat­ters. In­vest­ment spend­ing will grow the econ­omy (GDP) faster than the debt over time. If we in­vest now, that ra­tio will go down just like it did from 1945 to 1980 (120 percent to 30 percent). We still owe our war debt of $240 bil­lion in 1945 and Ron­ald Rea­gan’s debt of $2.9 tril­lion in 1989. (Rea­gan tripled U.S. pub­lic debt from $998 bil­lion to $2.9 tril­lion.)

When does in­vest­ment spend­ing be­come con­sump­tion spend­ing? When we feed nu­tri­tious meals to poor chil­dren, that is in­vest­ment spend­ing. When the gov­ern­ment feeds the well-off, that is con­sump­tion spend­ing. When we give med­i­cal care to those who can­not af­ford it, that is in­vest­ment spend­ing. Giv­ing free med­i­cal care to the rich is con­sump­tion spend­ing. Now, ap­ply this to all gov­ern­ment spend­ing, in­clud­ing tax cuts.

Our rich un­cle will loan us the money for in­vest­ments be­cause it will grow the econ­omy, re­duce the debt-to-GDP ra­tio, and in­crease rev­enue, but not for con­sump­tion spend­ing be­cause that leads to in­fla­tion. If that hap­pens, our rich un­cle can take money out of the econ­omy by sell­ing our notes and in­creas­ing in­ter­est rates. The Fed­eral Re­serve is our rich un­cle.

RUUD DUVALL Fayet­teville

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