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< Back to question Do deficits matter? Show more Show less

For decades, politicians and economists have condemned deficits as evil. Today, there is a lively debate about whether deficits matter and whether there are advantages to running them. Most notably Modern Monetary Theory encourages the government to run deficits in order to achieve its objectives of full employment and investment.

Structurally high deficits are bad Show more Show less

High deficits that are due to structural (as opposed to temporary cyclical deficits) are bad. They lead to higher inflation and the crowding out of private investment.
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High deficits affect the financial health of future generations

High deficits are a problem for countries in the long-term. That said, high deficits are accrued because of the debts of the people of the country. As each generation has more debt, it continues to affect the country in the future. This is what makes prices in the market higher for future generations. Prices continue to rise as deficits remain high.
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Proponents


Context

High deficits are obtained through unpaid loans and accruing of large amounts of debt. In 2017, it was estimated that there was $1.4 trillion in student debts. As time passes by, the debt from one generation affects the economy of the next. National debt is made by the debt of the people in the country; therefore, the next generation would have to pay more for things to cut down on national debt.

The Argument

Generational equity is the belief that all generations should be treated the same when it comes to finances.[1] It’s also a look into how current generations will affect the finances of future generations. This includes available jobs, minimum wage, and debt. There is concern about unduly benefiting current generations at the expense of future generations. The war between millennials and baby boomers has proven what could happen when people only think about their current financial state. Baby boomers believe that millennials are spoiled and lazy. Millennials believe that baby boomers ruined the economy and taught them how to be lazy. Looking at the difference between the economy during the baby boomer’s era and the millennials’ era, the millennial era economy was worse than the baby boomers. Because of baby boomer’s debt, getting a house became more difficult, jobs became less available, and education became more expensive. The economy won’t be able to provide for future generations when there’s so much debt. It’s been proven time and again that future generation are unfortunately handed the debts of the generation before them. The only way it can be fixed is if current generations use their finances wisely.

Counter arguments

Generational equity isn’t proven. Like an experiment, the idea is based off a hypothesis that current generations could affect the finances of future generations. Debt, income, and available jobs are affected by what the current generation does with their wealth. It happens with every generation. Having a high deficit only affects the current generation. They decided to have a lot of debt, therefore, only they will be affected. Even if they have children, it will be the parents who must pay their own debts. Debt doesn’t just carry over. In terms of government deficit, almost all countries in the world have high deficits. In 2019, France’s national deficit was about 2.634 trillion dollars.[2] Despite the high deficit, they still have a stable country. As long as the country is stable, the potential of doing well financially is possible.

Premises

[P1] Generational equity is the idea that generations affect each other’s financial health. [P2] Proof of generational equity is the fact that baby boomers ruined the economy for millennials.

Rejecting the premises

[Rejecting P1] Generational equity is an intangible concept that is just a hypothesis. [Rejecting P2] Millennials accrued their own debts, not their parents’ debt.

References

  1. https://www.encyclopedia.com/education/encyclopedias-almanacs-transcripts-and-maps/generational-equity
  2. https://www.statista.com/statistics/270360/national-debt-of-france/

This page was last edited on Tuesday, 30 Jun 2020 at 17:40 UTC

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