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
If you have debt you need to pay interest. So next year your budget is smaller because you have to allocate money to interest payments. If you borrow more money to pay of an old loan that’s bad and unsustainable.
HOWEVER, if you borrow money on year one and use that money to grow the economy, next year your total budget is larger then the increase expense of interest payments. This is good and healthy you are useing the borrowed money to benefit everyone. Now if the deficit grows faster then the economy then you are spending it unwisely.
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