Paying it back

Greece, Spain, Portugal, and quite a few other countries have been spending more than they have been taking in, especially since the recession started. To make up the difference they have to borrow, and all things being equal, you can’t borrow unless you are going to pay back the debt. Now, one of the phenomena’s of the modern world is the fact that many countries, including the United States, run a permanent deficit. This means that year after year, they have to borrow to make up the difference. Of course, as the debt grows the interest on the debt grows, thereby increasing the deficit even more.
Now, when you look at any enterprise that spends more than it takes in, you have to consider the reason. It is fairly acceptable to borrow a large amount now to pay for an unusual purchase that you will pay back over a future period, say a mortgage on a house. Of course, the loan is that case is secured and the risk to the lender is based on the underlying asset value. If, on the other hand you have to borrow every month just to buy groceries, you would need a dramatic shift in your fortunes to pay that back.
So what are these countries borrowing money for? Well unfortunately, much of the borrowing is going to fund current accounts, the day to day expenses of the government. Now, how are they going to pay it back? Well, the only way to pay it back is to run a surplus, not a deficit. Now, sometimes you can grow your way into a surplus, meaning that if the economy starts to boom, the tax revenues will start to increase, and if you don’t increase spending eventually the taxes collected will exceed the expenses. Now, when you set up programs that guarantee spending growth, you need more growth in your tax receipts.
Now, to some extent, certain countries are going through a particularly bad spell due to demographics. The number of baby boomers in the population is going to create demands on resources that are not sufficient to cover the demand. It might be reasonable, to run a deficit until this reverses itself, as long as the underlying math shows that it will reverse itself in the future.