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Economic Policies

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Macro Econ. Paper

November 17, 2006

Congressional Spending

The magazine article published in the November issue of Rolling Stone magazine entitled "The Worst Congress in History", by Matt Taibbi, provides some particularly negative insights on the idea of our governments spending policy. As a primarily liberal magazine, the article naturally has an extreme bias against a congress that republicans rule. However, they do provide some very intuitive information that is definitely worth further review especially in an economic regard.

One particular section of the article that struck my attention was the author's interest in the nation's current federal budget deficit, and, in his eyes, it is the fault of the congress. Taibbi says that when former president Bill Clinton left office, there was a 236 billion dollar budget surplus. Now, according to Taibbi, the nation is 296 billion in the hole. Along with these numbers, he also asserts that over sixty five percent of the entire world's borrowing is done by the U.S., and the fact that we shell out seventy seven billion dollars a year in interest to foreign debtors.

This particular section of the article refers to the concept of budget surplus and deficit; Expressions that have been a part of America's economy for years and years. The author of this article is very clearly bashing the U.S. spending policy over the last six years. He assumes that because we are so in debt to our creditors that we may never come out of the current hole we are in. He continuously bashes the reasons that our congress may have for the spending. He completely rejects any proposal that the expenditure may be paying off in the long run.

As we have learned in economics though, he is not looking at the long term effects of government spending. Our book states that the primary cause of any rise in government spending is war. As we know we have been engaged in a war with Iraq over the last three years. So naturally, our government spending and taxes will rise. Since our government, however, employs a finance policy of paying our debt the budget deficit will not severely hurt us in the long run. Since we slowly pay off our national debt, tax rates stay smooth. If we only taxed during times of war the tax rates would sky rocket. Another reason for debt financing is that it puts our deficit on future generations allowing them to pay off our debt when it is possible. This seems unfair at first, but it is a fair exchange since

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