To see the effects of our government’s economic policy on a micro scale, consider a person who makes $5,000 a month, and who has a credit card limit of $10,000. By spending more than his income, let’s say the total $7,500, that person increased their debt by $2,500 assuming $5,000 from his income was used to pay down a part of his bill. Next month, instead of spending less than $5,000, in order to help pay down the debt from the month before, he once again spends $7,500.If he continues to spend more than what he makes, eventually he will reach the end of his credit limit. At this point he would have to seriously curtail his spending in order to pay down the debt.

Instead, and similar to our government policies, he opens up a new credit card with an even higher credit limit at $15,000, and proceeds uses it to pay down his credit debt from the original card, while using the remainder for even more spending. You can see where this is going – the more debt this person takes on, the more trouble he’s causing himself in the future, even if he is able to sustain his spending habits in the short term. The only way he is able to sustain himself is by having more and more credit available to him. Once credit runs out, he will be left with two things: his salary and his debt.

Currently, over 70% of America’s GDP is based on consumer spending. In a recessionary environment, whether there exist less wage-earners, people are spending less and saving more, or costs of products are increasing, the GDP will be forced to contract. However, our government is encouraging banks to loan money and encouraging consumers to spend it, in order to keep the GDP from contracting.

As in the example above, following such a policy will simply perpetuate what we as Americans have been doing for years – borrowing and spending. The long term effects, however, will be nothing short of devastating. So far, our government has been able to borrow money from other countries, but once the other countries realize that our government won’t be able to pay back our loans, they will refuse to lend more money. When that happens, our government will be forced to pay back its loans. But how can they do that if most of our money is debt?

The programs that our government is undertaking to pump money into our economy are funded by debt. This policy is designed to encourage banks to loan money, and encourage consumers to spend it. Instead of suffering through the pain of having businesses that can no longer be profitable fail, and as a result have a temporary higher unemployment rate, the government is supporting business that failed to be profitable on their own.