Issue Position: Encourage Economic Growth

Issue Position

Our current administration foolishly believes that government spending will create jobs, stimulate our economy, and restore long-term economic prosperity to our nation. However, this could not be further from the truth. To understand how counterproductive our government's deficit spending has been, let us begin by asking one simple question: What causes an economy to grow?
The primary catalyst of long-term economic growth is private investment in capital resources. Capital resources include new equipment and technologies that increase the productivity of the U.S. labor force. When businesses purchase capital resources, they spend money in the present with the goal of being more productive and more profitable in the future. Because such resources are usually very expensive, most businesses must borrow money to purchase them.
Unfortunately, when the government runs large budget deficits, there are fewer funds available for businesses to invest in capital resources.
On the model below, the private savings (PS) curve illustrates our willingness as private citizens to save our disposable income at every possible interest rate. The investment demand (ID) curve represents the quantity of money that businesses would borrow to buy capital resources at every possible interest rate. The point where the PS and ID intersect represents the equilibrium point. In other words, the black dot shows the interest rate and the quantity of investment that would occur if the government were running a balanced budget. But as you know, the United States government is not even close to a running a balanced budget.

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The saving supply (SS) curve illustrates how government deficits drain our private savings and leave fewer funds available for businesses to borrow. As a result of this government "dissaving", there is a smaller pool of funds for businesses to borrow in order to expand their operations. Economists refer to this scenario as the "crowding out effect".
If the United States is going to achieve sustainable economic growth, Congress and the President must STOP RUNNING BUDGET DEFICITS. We need leaders in Congress who are willing to make tough decisions to drastically cut government programs that are wasting our nation's productive resources and preventing investment in future economic growth. If you are truly in favor of restoring economic growth to America, you should not vote for any candidate that is willing to pass a budget deficit.
SIDE NOTE: Another harmful side-effect of deficit spending involves interest rates. As businesses compete for loans from a smaller pool of money, interest rates throughout the economy naturally rise higher than they otherwise would be. Notice the movement from the black dot to the red dot on the model above. An astute reader will naturally ask, "Aren't interest rates currently low?" Yes, interest rates are extremely low today despite our persistent deficits. The Federal Reserve has dumped massive quantities of new money into our monetary system to keep rates artificially low. Although this manipulation of rates may seem beneficial for businesses who wish to borrow in the present, it will lead to unusually high rates of inflation in the future. See "Audit the Fed" for more on this topic.

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