ETF Trends
ETF Trends

Following another disappointing first quarter for the U.S. economy, many economic policy experts are once again asking: “What, if anything, can be done to accelerate the United States’ persistently soft recovery?”

One dimension of this debate is whether the U.S. government should be doing more to stir up demand, even if this means taking on more debt. Given the United States’ already sizeable existing obligations, I’m skeptical that another debt binge is in the interest of the country or the economy. Here are four reasons for my skepticism of massive, debt-fueled government stimulus.

1. There’s a lack of clear evidence it will work.

Historically, there has been no correlation between government borrowing and gross domestic product (GDP) growth. In other words, debt-fueled government spending hasn’t been associated with faster growth. To my mind, the onus is on those arguing for more debt to draw a clear path between further borrowing and economic growth.

2. An aging population is already challenging government finances.

An older population will challenge the U.S. economy in a number of ways. Slower work force growth will make it harder for the United States to achieve its historical growth rate. In addition, an older population will put increasing pressure on government entitlement programs, which were designed at a time of shorter lifespans and retirements.

3. There is already too much U.S. government debt.

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