How Deficit Spending is Getting a Bit Out of Hand

With all the stimulus that happened in the last few years thanks to the recession, it always bugs me to see just how much of each person's taxes we pay on the Interest of the debt, let alone actually paying it down. For example, in 2012 the Canadian government's debt was around $586 Billion with Interest payments of $41 Billion. That means that each year if everyone, including retirees, the unemployed and children payed taxes, over $1200 from each person would go just to the interest of the debt, let alone paying it down to reduce the interest in the future.

For the United States, it is even worse. They have over $15.5 Trillion in debt, with interest of over $430 Billion per year means that each American pays over $1300 per person.

Yet the governments takes forever to cut spending or raise taxes, and if taxes are raised they just end up spending more.

On top of that, deficits are run in good economic times and bad. This causes the budget to cycle between being short a little during good times and being short a Lot in the bad times, only adding to the problem. This was true from the 1960's until the mid 1990's. The small surpluses from the years after 1996 have not nearly made up for the massive yearly deficits for the 30 years beforehand, as shown on the graph below

Source:  http://fin.gc.ca (Government of Canada)

If more focus was paying off what we owe now, just think of what we could do with an extra 16% of the government's revenue freed up. We could pay less taxes or receive better services. Or maybe we can even lend that money out to others and invest, so we have to pay even less in the future.

It always bugs me to find out just how much of the money I earned is wasted this way. Paying taxes are not always great, but wasting more in the future just so we pay less now does not make much sense. Although it is hard for a party to get elected while cutting spending and raising taxes, in the end, it works out much better. It also allows future governments to get better value of our tax money, allowing our economy to forge ahead stronger in the future