In February, the Bank of Italy announced that its public debt had increased to 1.708 trillion euros. It had risen nine billion dollars in just one month and has caused the income from tax revenues to decrease sharply. This meant the Italian government had about 2.685 billion dollars less to work with. The article states that Italy has the third largest public debt in the world which equaled more than their annual GDP. Furthermore, it is predicted that the economy would shrink by 3.7% this year (the worst performance for more than 50 years) which puts a strain on the resources needed to eventually pay off the debt.
Public debt is the money owed by all levels of government and has an impact on inflation. To the average citizen, the concern over the public debt is tied to rising prices because increased borrowing and spending by governments create an increase in demand for goods and services. The burden to pay off the debt is on citizens (who pay through raised taxes) and maybe present for future generations. It is often seen as unfair because the politicians who created the problem are not in power, yet their problem must be solved by the people living 20-30 years from now.
For people in school right now (GRAD '09), we should be concerned about what our parents and their votes towards politicians. The mess that they make could make us shake our heads and think "how stupid", but it also means that we may be cleaning it up afterwards. A decade from now when we are starting jobs, families, ect. the public debt and how much of it is paid off will impact our taxes. In order to finance government borrowing and spending, the marginal tax rate must be raised which means less money in peoples pockets. To pay off a high public debt, incomes are decreased and the ability to spend follows which decreases any confidence the public has on its elected government.
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4 comments:
When the government is in debt, there is a large burden on its citizens to help repay the loan. Whether it is through increased taxes or increased inflation rates, the money is ultimately obtained through the pockets of hardworking citizens, who, of course, must be able to afford the subtraction of their income. Although I also feel it is unfair to have to clean up the mess of the government, it is also our job as citizens to "roll with the punches". As a Canadian citizen, however, I feel any more of an increase in income taxes may be too much for even the wealthy to handle, due to the fact that taxes here in Canada are already higher than a lot of other nations.
Raymond Chen
Block E
Econ 12
I, too, agree with Raymond's opinion. It is truly unfair how future citizens have to repay the debt. It is already difficult for citizens to pay for their own income taxes as we have one of the highest tax rates compared to other nations. Also, it is expected that the debt will increase because of interest rates. To help uplift the burden of paying off the debt, governments should lower income taxes. When income taxes are lowered, people would want to spend more. This encouragement will eventually trigger the multiplier effect, which would serve a great impact back to our economy.
Henry Ma
Block E
Econ 12
I do agree that we should be concerned about our parents' decisions in terms of voting for politicians. There are a lot of people that choose not to vote at all, and to me, that's a pretty stupid idea. We live in a democratic country where we have the right to choose who want to run the nation, yet here are people who decide that they don't want to take 2 minutes of their time to check off a name. Then, they go complaining afterward because they don't like who's running the government. As soon-to-be-adults, we definitely should know what's going on politically because as you said, the country's public debt will most likely impact the way we live in the future.
A. Chow
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