As long as the US can borrow, let’s spend

In the US, one of the topics for discussion (forgetting about Bill Clinton Inc., and Huma’s emails) is the double digit increase in Affordable Health Care premiums. Supporters say that the double digit increases are meaningless since they are covered by subsidies (they often leave out that they are “government subsidies.”

So what does this mean and why am I writing about it. Simple, the government subsidies have a real cost that has to be paid either through higher income taxes or increased government borrowing. The problem is that the government is spending more than it is taking it, by an increasing margin.

Since raising taxes directly is hard, the most favored approach is to increase borrowing, which is good as long as you can find someone to give you the money. So far that hasn’t been a problem, but it will be sooner or later.

Right now there are early signs of inflation since most of the increase in economic activity is consumer spending. This means that buyers are more plentiful but with industrial spending not keeping up, the dollars will chase less industrial output.

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