Why Debt Is OK

The never ceasing mantra of the Republican party is that  going into debt is a terrible, terrible thing and will  lead to the end of American prosperity. Of course, this is nonsense. Why?

I purchase a house for $300,000 and use life savings to  put down a $30,000 deposit. This leaves me with a $270,000 debt and I earn $40,000 per year. I am lucky after making mortgage payments and living expenses to break even. It will require at least 30 years at this rate to pay off my debt. Over 90% of Americans spend twenty or thirty years in debt and do not go bankrupt. Of course, in this case, the value of my home increases which means when the house is sold, I might even make a profit.

So, what do we learn from economics. If in going into debt, the overall value of society increases, the debt is a positive factor. For example, veterans of WWII, the Korean War and the Vietnam War received large amounts of money to pay for education and vocational training. Statistically, for each dollar received they eventually sent to the US Treasury about $20.


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