The Republicans have been focused on the national debt and deficit ever since they couldn’t control the purse strings of the nation. Before this, the Republicans had full control and even the Vice President, Dick Cheney said, “deficits don’t matter”. This is obvious an about face to their current mantra.
They have told the American people that you can not create prosperity by going into debt. The problem with their theory is the Republican presumptive nominee, Mitt Romney, did exactly this.
Mitt Romney was in the business of leveraged buy outs. What is this? A leveraged buyout is essentially using debt to buyout a business for a potential profit and increasing personal prosperity.
This is how it works in its simplest terms. Mitt Romney’s company would purchase, through debt, a controlling interest in a company’s equity or value. The assets of the acquired company are used as collateral for the debt he used to initially buy the company in the first place.
So by initially going into short term debt, he used the debt to potentially increase long term personal and business prosperity. The same theory works with government debt, as long as that debt is directed toward creating jobs.
On a personal level, Americans do this all the time, whether it may be going into debt to purchase a home or start a business. The short term debt can increase long term prosperity.
Mitt Romney’s private business history proves that progressives have been correct and the supply side conservative economic model doesn’t work. Debt creates prosperity, whether it is accumulated by the public or in the private sector.
Restricting debt or credit stalls prosperity and economic growth. A great example of this can be seen through the 1980s. Back in the early 1980s, the interest rate was extremely high and borrowing money was very expensive. This initiated the economic recession of the early 1980s. In fact former Federal Reserve chairman Paul Volker said in 1979, “The standard of living of the average American has to decline.”
By the mid 1980s borrowing became very easy, thanks to Alan Greenspan and the Federal Reserve. The American consumer was able to easily borrow against future wages. This spurred the economic growth of that decade. Think about how easy it was to obtain a credit card in those days. Today, the consumer is now paying for the borrowing of those easy credit days and can not handle more. We are in what many economists are calling a phase of “deleveraging”.
So, in closing, if Mitt Romney was not able to acquire and accumulate debt to purchase businesses, he would not have been successful in business and would have not been prosperous at all.
This is what happened with the current economy. There were many Republicans, along with many conservative Democrats, who didn’t want to use debt as leverage to create jobs, like Mitt Romney did in the private sector. They restricted the “credit” of the United States and stifled economic growth.