Do budget deficits and government debts matter?
Very much so. These deficits are funded by selling Treasury bonds and other instruments that carry an interest rate so the reality is even if we quit adding debt right now, it will still grow. As we add more debt we’ve run into the fun problem of our bonds becoming more difficult to sell which leads to debt monetization which in turn leads to inflation (usually hyperinflation at that), debt monetization and bad inflation make it more difficult to sell the bonds as potential buyers see them as an asset that will be worth less by the time they cash it in or sell it to someone else. The term bond is appropriate as they are representative of the government’s promise to pay the bearer a specified amount that will be funded with taxes, so basically you, I and every other poor sap taxpayer are ‘bonded’ by these promises. Long term this debt will lead to massive tax increases, unfortunately that tends to be counterproductive once tax rates soar to punitive levels.
