TAX AND SPEND is a bad policy in the first place. If tax is not enough then borrow to spend is the worst policy. It is a sign of incompetent government to engage in public debt in order to stimulate the economy. If the government is doing a good job in managing or guiding the economy, it should generate enough tax revenue for the government. Deficit spending in order to stimulate growth is antithetical to common sense.

HOW MUCH DEBT IS HEALTHY? If the borrowing is to stimulate the economy, the output should be able to repay the debt. That is, the tax revenue raised from the output should be enough to repay the debt and interest.

THE GDP EQUATION is Y = C + I + G + net trade. Government expenditure is only one of the factors in the right side of the equation. Economic stimulation to grow Y may come from other factors. A concentration on C will lead to consumer debts and less savings that will generate savings for invest and growth in net trade. The stimulation package must consider all factors.

Debt is a wrong way, so you must depend on your own resources all the time.

debt is a bad policy, therefor you must depend on your own resources all the time.

The above responses offer the opinion that debt is bad policy. Unfortunately the REALITY is that governments very much rely on debt as a source of finance in addition to taxation. You can get data on this via the IMF, World Bank, OECD etc websites. Governments get around this by raising the debt ceiling - the amount they are permitted to borrow through issuing bonds.

Govt debt is challenging at the moment because with relatively benign inflation, debt does not reduce in real terms with the passage of time as it used to when inflation was higher; and with historically low interest rates, variable rate debt is a ticking timebomb IF interest rates were to rise noticeably (although governments can get around this by issuing fixed rate debt).

The consequences of issuing too much debt are the risk of default which then impacts on the rate of interest the government has to offer on its debt; and currency devaluation as we saw in the US and UK following the govt bailouts of the banking sector in the Global Financial Crisis.

The UK is an example of a country whose currency has devalued significantly since the GFC and Brexit such that British assets, such as property and stock market equities, are now relatively cheap for foreign investors. While the British themselves have lost considerable personal wealth due to the devaluation of their own currency.

Government debt is the "necessary evil" of modern times in the world. In Europe, many developed countries rely on debt to cover their budget deficits. The standard limit set as a rule in the European Union is 60% of GDP. How optimal it is, however, is unclear. Some of the most developed countries have huge debt over 150% to GDP, and some of the weaker countries have a public debt of 10%. I think thaht the standard limits may be formed mainly by the degree of need for the debt and its repayment capabilities.

Best regards!

A surplus in the state finance system is a better and safer situation for the functioning of the state than the debt of the state finance system. However, for many years, for most of the business cycles, political cycles, periods of functioning of states in central budgets and other financial systems of individual countries, they were usually burdened with debt instead of a surplus. this situation greatly increased the scale of the negative economic effects of the global financial crisis of 2008. Greater indebtedness of the state finance system means less opportunities for the state to implement pro-development investments. It also means less possibilities of implementing anti-crisis programs as part of interventionist socio-economic policy in order to quickly restore economic growth, stop the growth of real unemployment (to a large extent not shown by data from labor offices), limit the decline in production, income, investment, etc., i.e. also the current one downturn caused by the SARS-CoV-2 coronavirus pandemic (causing the Covid-19 disease). The history of the economic development of the world shows that the greatest financial and economic crises were the main factors forcing the improvement of the state's public finance security system. Some countries have safe, prudent debt ratios specified in the constitution. It is primarily the ratio of public debt to GDP at the level of 50%. After the global financial crisis in 2008, some countries added this issue to their legal regulations and / or started to take this issue into account, to ensure a safe level of indebtedness of the state finance system. In the European Union, these public finance system security standards were adopted as the basic, standard, elementary indicator of the security of public finances of the state. An important element of the state public finance security system is, in addition to the central public finances of the state, the level of debt of budgets in local government units, city budgets, and the budget of the social security system responsible for pensions paid to citizens under a participatory pension system based on social solidarity of many generations. Each of these budgets, regardless of the central state budget, should also be balanced, at a safe level of debt. Moreover, after the global financial crisis of 2008, in many countries, the public finance systems were also strengthened by other financial security instruments, such as increasing the reserves of the bank deposit guarantee system in 100%. to min. 100 thousand Euro in one commercial bank (regardless of other banks) in the event of bank failure. In addition, in the EU, the European Central Bank has created additional financial stability funds as a hedge against further financial crises, and national central banks have increased their reserves in gold and other assets. Moreover, the state's public finance system is multifaceted, e.g. through central banking, with the system of a commercially functioning financial system, the level of which also affects the security of the state finance system. The security of entities in a commercially operating financial system, i.e. primarily commercial banks, depends mainly on specific and other reserves accumulated in banks. I have described this issue in more detail in some of my publications available on the Research Gate portal. I conduct research on this subject. I have published my conclusions from the research in scientific publications available on the Research Gate portal. I invite you to research cooperation.

Best regards,

Dariusz Prokopowicz