Friday, February 25, 2011

A Teachable Moment

This week in class I introduced the relationships between national saving, investment, and real interest rates. The latter part of the chapter talks about the history of the national debt. So, we talk about charts like these:Source: Washington Post, Ezra Klein "The U.S. Government: An Insurance Conglomerate Protected by a Large, Standing Army"

Source: Center on Budget and Policy Priorities.

We talked about long-term debt being mostly driven by entitlements and how no one in either party wants to be the first mover in tackling the real problem.

One student, who was not raised in the U.S. (which gives him a wonderfully innocent point of view), raised his and and asked:
"Let me see if I understand this correctly. Politicians don't want to cut spending programs because that makes people mad. But they also don't want to raise taxes because that also makes people mad. So, in the end they just won't do anything, and we're all screwed? That sucks!"

Yes, it certainly does.

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