What is a common consequence of excessive government debt?

Excessive government debt often leads to reduced economic growth for several reasons. When a government accumulates significant debt, it may have to allocate a larger portion of its budget to interest payments, which reduces the amount of money available for public investment and essential services. This can hinder economic development and the provision of infrastructure that supports growth.

Moreover, high levels of debt can lead to increased uncertainty in the economy. If investors perceive the debt level as unsustainable, they may anticipate tax increases or inflation to manage the debt, which can dampen consumer and business confidence, leading to decreased spending and investment.

Additionally, excessive debt may necessitate austerity measures, where the government cuts spending or raises taxes to manage the debt burden, further contracting economic activity. Therefore, reduced economic growth is a common and significant consequence of excessive government debt, highlighting the interconnectedness between fiscal policy and overall economic performance.