A WSJ article on Japanese elections comes with the following table.
Japan has spent 20 years fighting deflation with loose monetary policy and deficit spending. To what end?
Keynesians point to Japan’s experience as evidence that the U.S. government can borrow much more before interest rates rise. I suspect they’re right. But what’s the point if, at the end of all of that, we’re saddled with unpayable debts?
Sure, deficit spending prevented more violent economic upheaval last year. But the more debts we build up, the longer and deeper the downturn will prove to be over time.
The article has many interesting details…
- The party that’s been in power for 59 years will likely lose the elections to another, which promises “ambitious spending programs” despite Japan’s huge debt.
- Incomes continue to fall. Inflated artificially by a credit bubble, Japan’s per capita income once ranked 4th in the world, but has since fallen to 14th.
- Declining birth rates mean younger Japanese don’t have the voting power to reduce entitlement spending that’s asphyxiating the economy.
My hope is that America finds the political will to deal with debt. If we don’t, even matching Japan’s sorry trajectory will be tough.