If we stop spending, then does it not follow that more debt will go unpaid, as more and more and more people and businesses are sucked into the abyss? As this debt fails, existing debt will become more expensive, and yet more debt will default, until finally, by my estimates some 90% of ALL debts currently held default. This includes retirements, bank held debts such as credit cards and mortgages, commercial real estate debts as customers are ripped out of the economy and so on.
We are in an economic downward spiral. How are you going to increase taxes, when all around, the tax base shrinks faster than taxes can be raised? If the government stops spending (retirements are drastically cut), routine maintenance is deferred etc, how does this not simply pass another more insidious debt to our children and their children. One in which dams fail regularly, bridges collapse and in which we are no longer a technological society?
I am reminded of the anecdote of the restaurant owner along a freeway. Her son comes to her one day and tells her bad things are happening in the economy and they should not pay for the freeway sign any more. The mother later told her son that his good advice was just in time, since things slowed down right after the sign was removed.
My feeling is that everything possible should be done to stoke wage inflation (specifically) and get people back to work. Anything short will result in deflationary collapse.
