Is nobody seeing the warning signs?

I opened my international political economy textbook from my basic college international political economy class and I found this. It's about developing countries, but the principles are clear. What are our political leaders reading?

"Economic crises emerged in the early 1980s in large part as a consequence of governments' decision to cover their budget and current-account deficits with foreign loans. Using foreign loans to finance budget and current-account deficits is not an inherently poor choice. But two factors made this decision a particularly bad one for developing countries in the 1970s. First, many of the funds that governments borrowed were used to pay for large infrastructure projects or domestic consumption, neither of which generated the export revenues needed to repay the loans. As a result, the amount that developing countries owed to foreign lenders rose, but their ability to repay the debt did not.

Second, between 1973 and 1982, developing countries were buffeted by three international shocks: an increase in the price of oil, a reduction in the terms of trade between primary commodities and manufactured goods, and higher interest rates on the foreign debt those countries accumulated. These shocks increased the amount of foreign debt that developing countries owed to foreign banks, raised the cost of paying that debt, and greatly reduced export earnings."

It goes on to explain how India of the 70s and 80s, at the time recognized as "one of the most regulated economies in the world," accumulated inefficiencies in state-run enterprises that dominated their manufacturing sector. "The government responded to flagging growth by expanding its expenditures sharply throughout the 1980s. The resulting budget deficit contributed to a persistent trade deficit, which the government financed by borrowing from abroad. By1990 India had become vulnerable to a balance of payments crisis."

Our government is currently embarking on a dramatic deficit spending spree. Deficit spending means the money they spend does not exist, yet. In order to spend, the government must either print money, which means assigning assumed future value to pieces of paper (think Dumb and Dumber, with Harry and Lloyd returning the briefcase of ransom money with IOUs. "We're good for it." Uuuh-huh). Otherwise, the government can get money through loans from foreign banks such as China. As you can see above, this is a dangerous cycle.

I guess my point here is that the redistribution of capital or incurring of foreign loans by the government is leading us into crisis. "Stimulus", social programs, or taxes on the wealthy do not change any of the fundamental problems with the economy, but may in fact exacerbate them.

*Oatley, Thomas. International Political Economy: Interests and Institutions in the Global Economy. 3rd. ed. New York: Pearson Education, Inc., 2008.