Can someone explain how national debt effects the lives of normal people? It seems like almost every developed western nation runs massive billion dollar deficits every year, and that seems to be totally fine. Nothing bad ever seems to happen. Occasionally you hear old school conservatives saying we need to balance the budget, but why should we if every country is in debt with seemingly no negative effects?
In: Economics
Nothing bad ever seems to happen because debt isn’t, in and of itself, a bad thing.
Debt lets you spend money soon and derive the economic benefits from it sooner. You can try to save up money for decades to buy a house, paying rent all the while, or you can take on debt right now, buy a house now, and in the long run what you save on rent outweighs what you pay in interest.
A national economy works the same way. You borrow money to build a bridge *now*, and that bridge provides and economic benefit *now* that hopefully outweighs the interest. Debt is time traveling for money. “Normal people” benefit from bridges and roads and schools sooner than they otherwise would have.
Of course, that only applies if debt is used wisely. When it is used unwisely, the growth of your economy slows, your currency devalues, and you have to pay more interest to borrow money. To the normal person, this means imports, particularly energy imports, become more expensive. Also, the slowing economy means fewer jobs and less demand for labor, resulting in more unemployment and lower wages.
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