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Originally Posted by Greg
If you're in debt - and someone gives you some money - you have two choices. Pay off your debt - or spend it, and spend even more, on your credit card while you're at it. Choose the latter and the guy that gave you the money might get pissed and start making demands that you change your ways, or chooses to cut you off. At some point you either go bankrupt, or you make a deal with your creditors to take a haircut, and you wise up and eventually pay them off.
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Governments (and especially governments with their own currency) are not the same as households or businesses. The government has an obligation to follow policies to support employment for all its citizens that's very different than what a household or business does. If your reaction to that statement is that that isn't in the Constitution -- imagine the US with a balanced budget and 30% unemployment. The government wouldn't last long in that scenario.
The data shows that the European (UK, Greece, Italy) experiments with austerity -- reducing their future debt by cutting government spending -- has proven counter-productive. Cutting government spending has increased debt by creating more unemployment and reducing tax receipts.
Simply put: you can't save your way to prosperity. You have to invest your way to prosperity.
Fixating on debt at a time when the economy is operating below capacity and millions of people are out of work (or working below their skill level) is a false savings. A better policy would be to pursue an agenda to support more employment and grow the economy to reduce debt in the future. And that's especially true when the US government can borrow money at historically low rates.