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Excess Federal Borrowing Case Study

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• Excess federal borrowing results in detracting the money away from private investment in productive capital in the long run time period.
• Federal spending would rise mainly in regards to interest payments. It influences the government to raise taxes that results in reduction of the spending for benefits and services.
• Policymakers’ ability to respond unexpected challenges like financial crises and economic downturns would be degraded as they would be restricted from using tax and spending policies.
• Defense spending would be constrained as excess federal spending would create situation of compromising with the national security.
• Excess federal borrowing results in detracting the money away from private investment in productive capital
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