Rising government spending and public debt create economic stagnation and declining living standards. Many citizens believe that the state will give them prosperity and equality. However, the state only makes paper promises by issuing debt, creating a constantly depreciated currency. Taxpayers are constantly expropriated, while the recipients of subsidies become a dependent subclass. Who wins? Bureaucrats.
Deficit spending is not a tool for growth. It erodes prosperity, creates persistent secular stagnation, real wage growth decline, and poor productivity growth.
High public spending and government debt falsely inflate GDP through government outlays while, in most cases, masking a private-sector recession underneath. GDP is easily manipulated by increasing government spending and changing the calculation of GDP deflators.
The state issues debt, a form of currency, and establishes a system that continuously suffocates the productive sector. In effect, GDP and CPI serve as measures of economic strength that obscure the imbalances created by the state; GDP overstates real growth by incorporating government spending financed by debt, while CPI, like the GDP deflator, underestimates the currency’s loss of purchasing power.
Major economies face a hidden real recession for households and small businesses using “robust” headline figures bloated by ever-rising government debt. Every new dollar of debt now generates less than sixty cents of nominal GDP in the U.S. However, when we look at countries like Japan, France, the UK or Germany, the multiplier effect of new government debt is either nonexistent or negative. The consequences are evident: true productive economic expansion is hurt by rising taxes, regulatory burdens, and inflation, which reduce incentives for private investment and innovation.
Statism creates enormous disincentives for productive investment and promotes malinvestment and the constant transfer of wealth from the productive sectors to the government. Governments finance their ever-expanding budgets in privileged conditions, creating a crowding out of the private sector that suffers the consequences of persistent inflation and raising taxes.
Hellbound and Down 