Plausible? The Government Wants You in Debt

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Do government policies make it much easier to be a spender rather than a saver?

A WiseBread post makes just that accusation:

Taxes (either increases or decreases) have been a method in which a government can modify personal behavior. If the government wants people to stop smoking, it creates a “sin” tax to make it more costly to smoke. When a government offers tax incentives for acquiring debt, they are basically stating they want you to purchase things with debt. The government then rewards you when you comply.

The examples given of the government’s debt-fostering efforts include recent initiatives such as Cash for Clunkers and the $8,000 tax credit for first-time home buyers, along with the longstanding practice of allowing mortgages to be tax-deductible—which nearly every other country does not do.

So, is there some sinister conspiracy afoot? I don’t think so. Not exactly anyway. It’s pretty obvious what the government is doing, and has been doing for decades. The goal is to get the economy cranking along in eternity, and because that is an impossibility—the natural flow has ups and downs and plateaus and false starts—the politicians and econo-wonks toss in occasional jumpstarts and kicks in the pants.

The economy hums along best when people buy and buy and buy. Whether or not they need or can afford what they’re buying is beside the point. The government and all the business interests don’t seem to care. Giving the powers that be the benefit of the doubt, perhaps it’s just an unintended consequence of these policies that many, many consumers are deep in debt.

Then again, do our leaders actually prefer it when we’re “aspirational” consumers, buying things that are beyond our means? When people are in debt, they’re driven to dig themselves out, and they’ll work and work and work to do so—and then, human nature being what it is, a good portion of them will want to reward themselves by buying some more stuff, starting the whole cycle over again. And what do you know? The presence of a workforce that’s really eager, even desperate to work is also good for the economy.

Saving’s Double-Edged Sword: Good for You, Bad for the Economy

You Need to Save. But Collectively, We Need to Spend