While there is a law for expenditures growth (Wagner´s law), there is no law (aside from Murphy laws),for public debt growth. This difference count quite a lot, because in the first case there is a way to deal with the issue of more expenditures: Increase incomes. Whether it is throughout lower taxes , less inefficient regulations, more flexible markets and the like. The menu is wide and the option is clear: unless incomes growth keep its pace, there is no way to increase expenditures indefinitely . The implications of this result is obvious: to keep the growth machine in good shape.-
But in the second case, because of its riskier nature ,there is no other way but to get the public debt under control, which it is not cost free because it takes a bite to economic growth. Thus, public debt becomes a restriction for growth, which in such a case can no longer sustain further expenditures growth. Therefore , the second implication of public debt is that it becomes highly regressive. Europe efforts to solve this problem, has increased poverty at unimaginable standards for European countries. (Spain and Greece have 20% of poverty, the average for Europe is 16,4%.As a reference , Chile has a 11% of poverty level, still better than France, Austria and Hungary).Public debt in Chile is no higher than 10% of GDP, and in the second half of the past decade was an average of 7% .
The current status of public debt as a share of GDP in developed countries is worrisome : Europe has 90% ,USA 100% , Japan 200%.On the other side, the BRIC countries have less debt as a share of GDP.Latam has on average of 20% as a share of GDP . It follows (third geoeconomics implication of public debt ),that the better prospect for global economic growth in 2013 , comes from these countries which might become the new engine the global economies needs.
