In ancient Greece, the saying went that a democracy dies as soon as the public realizes it can vote itself the keys to the treasury. After three rounds of stimulus—and with a fourth round under consideration—let’s hope for the sake of our democracy that the public doesn’t catch on.

Government deficit spending during a recession makes some economic sense. The idea, in fact, originated with the most influential economist of the 20th century, John Maynard Keynes. Writing during the Great Depression of the 1930s, Keynes argued that, if private spending on goods drops due to some unforeseen event, the government can make up the difference by buying goods with borrowed money. Keeping spending stable prevents a drop in firm revenues and the rise in unemployment that follows.

Of course, in the long run, the economy would recover on its own. But why wait? In Keynes’ famous phrase, “In the long run, we’re all dead.” When the recession is over, the government can repay the money it borrowed during bad times, smoothing out the business cycle without increasing national indebtedness.

The problem with Keynes’ recommendation is that governments happily spend money they don’t have when times are bad. But they never repay the debt when times are good. Consider the U.S. government over the last two business cycles. Following Keynes’ advice, national indebtedness rose after the recession of 2001 and exploded after the recession of 2008-2009. After the recoveries, the debt stabilized, only to grow again. In fact, the largest peacetime, non-recession deficit in U.S. history occurred in 2019 when unemployment was at a 60-year low. If the government couldn’t balance the budget then, let alone repay debt, it seems unlikely it ever will.

Currently, the U.S. national debt is over $28 trillion—that’s $85,000 per person and $224,000 per taxpayer. The debt was 54% of GDP at the end of 2000 but 129% of GDP at the end of 2020. That’s concerning, as nations with a debt-to-GDP ratio over 100% have lower economic growth rates.

Only four options exist for over-indebted nations, each unpleasant. Reduce government spending. Raise taxes. Create new money to pay down the debt. Or a sovereign default. While Keynes’ prescription makes some sense in theory, in practice it has led to a national debt explosion.

The problem is, we are living in the long run and Keynes is dead.•


Bohanon and Curott are professors of economics at Ball State University. Send comments to