d by high interest rates and stability, foreigners now buy huge amounts of U.S. national debt. Of course this cannot be the perfect solution otherwise no one would be concerned about the debt. The problem with borrowing from external sources is the lack of control the government has over foreign currency and debts. Internal debts can be paid with increased taxes, inflation, and other monetary controls the government has but external debts can extremely damaging to a country if it cannot buy enough of the foreign currency to pay the interest. Running a deficit is apparently good for an economy that is operating inside its production possibilities curve but it can be damaging to an economy operating on the curve. A deficit managed properly has the effect of increasing demands. An economy inside its curve can increase supplies in reaction. An economy on the curve can increase demand but its supplies cannot increase causing prices to rise, or inflation. If there is no deficit and the curve shifts to the right then supplies will not increase and the country will no longer be operating on the curve. A deficit must be maintained to insure that the economy grows with its resources. Is the U.S.’s current debt bad or good? The trick is finding out how large the deficit should be in order to allow for growth without waste. The U.S.’s deficit is bad at this point because the U.S. is close to its maximum production capabilities, and deficit money is being wasted. For example two of the largest portions of the budget: defense and social security. Defense spending produces little or nothing except in times of war. Judging by the current status of the United States as the only existing “Nuclear Super Power” war is not a tangible event in the near or distant future. The way social security is managed creates a huge waste. As managed, social security is money spent to immobilize a large and fairly capable part of the work force. I...
