The government has two main mechanisms to try to impact the U.S. economy: fiscal and monetary policy.

Fiscal policy uses government spending and taxation in order to affect the economy. During times of recession-like the one we are experiencing now-the government can spend more money or lower taxes to increase aggregate output.

Monetary policy is the control of the monetary supply and interest rates in order to control spending. During a recession, the Federal Reserve, the arm of government that controls monetary policy, can engage in tasks that are meant to lower interest rates in the open market.

Although these tasks are integral to trying to control the business cycle and pull the country out of a recession, they, like any medicine, can have serious “side-effects.”

Expansionary fiscal policy, increasing government spending and lowering tax revenue, brings with it an increase in the budget deficit. This year the Obama administration has predicted a deficit of $1.75 trillion, almost four times the record set last year of $450 billion.

This represents the annual growth of our national debt, which is financed by various government bonds. The obvious problem is that these bonds must at some point be repaid, and just like any family who has accumulated too much debt, the interest can become overwhelming. Of course, unlike a college student on a spending spree, the U.S. government has the power to print the money to repay the debt, a policy that also carries with it a dangerous cocktail of economic problems.

Expansionary monetary policy, which seeks to lower interest rates in order to spur spending on durable goods and real estate, leads to inflation. Inflation, or the reduction in the purchasing power of a currency, makes wages less valuable in terms of their capacity to buy things.

While some measure of inflation is natural-just listen to your grandfather talk about nickel frankfurters-high rates of inflation can literally destroy an economy, as was seen in Post WWI Germany and the former U.S.S.R.

Just like it is important for a person to ask a doctor how their medicine may affect their body down the road, it is imperative that citizens understand the possible side effects of the government’s path to recovery.