Borrowing can make us all poorer  

The nub of the political argument today is over borrowing. The government claims that state borrowing huge amounts now helps recovery, keeps the economy going, and is evidence of its economic prowess. The Opposition says that borrowing too much is risky, could push interest rates up, lead to a loss of confidence, and shows economic incompetence. There is another argument critics of too much taxpayer borrowing should use as well. It goes like this. Borrowing is deferred taxation. It damages output and demand. When the government borrows on behalf of taxpayers, it takes the money from companies and individuals who lend it. They no longer have that money to spend. The government spends it on their behalf instead. So the borrowing cuts private sector demand at the same time as it boosts public sector activity. Worse still, people sense that whatever...