Comments on: Defici(en)t Thinking

By: Steve Landsburg

Steve Landsburg — Tue, 29 Mar 2011 13:49:02 +0000

Lawrence H. White: This is of course an important point and one I’ve written about elsewhere. But I think it would be a considerable stretch to argue that this was what Mr. Seib (in the article to which I was responding) had in mind.

By: Lawrence H. White

Lawrence H. White — Mon, 28 Mar 2011 20:07:42 +0000

“Once that $100 has been spent, the taxpayers are out $3 a year forever regardless of whether the debt is ever paid off.”

Steve, I get the present-value equivalence of (current taxes avoided by $100 borrowing) with (future taxes entailed by the same $100 borrowing). I agree that the amount the government spends is what matters for the size of the burden it imposes, not whether the taxes come sooner or later.

But you might want to address the Buchanan-Wagner argument that the amount of spending isn’t independent of the finance method. The taxpayers who would be taxed $100 today are not identical to the group who end up paying $3 a year forever. Borrowing obscures the burden to current taxpayer-voters or allows them at least partially to avoid it (shifts it on to people not currently voting). Some people don’t have heirs or don’t leave them bequests; the taxpaying population grows through immigration. It BW are right, then we invite more (too much) spending by allowing it to be debt-financed.

By: BestQuest

BestQuest — Sat, 19 Mar 2011 17:32:58 +0000

Rather than raising taxes by $100, the government could simply default on the debt. The only people who would be hurt are the guilty: The tyrants, the people who fund them (by lending them money), and the greedy recipients of stolen loot (defense contractors, Wall St. welfare queens/kings, labor monopolists, and similar parasites).

By: Tagore Smith

Tagore Smith — Sat, 19 Mar 2011 07:49:18 +0000

Thanks. I have been trying to explain this to people for years. Debt is fine.. excessive spending that does not produce a return is not.

But I think that people will not get this until it is too late.

By: S.V.

S.V. — Fri, 18 Mar 2011 13:16:14 +0000

A post about Nuclear energy?

By: Bill

Bill — Tue, 15 Mar 2011 02:45:05 +0000

Statements in the Seib article related to payments of interest to Chinese purchasers of U.S. government debt and the assertion that “this represents a giant transfer of American wealth overseas” are bothersome. While I agree that interest on government debt is a burden on taxpayers, I don’t see why interest paid to parties living outside the U.S. is any more of a burden than is interest paid to parties living in this country. First, like dollar payments made to foreign suppliers of goods and services, foreign lenders will be using those dollar interest payments either to purchase U.S. goods and services, to invest in assets in the U.S., or to supply loanable funds to borrowers in this country. So, in this regard, the interest paid to foreigners is no different than is the interest paid to domestic lenders. Secondly, the interest payments made to foreign holders of U.S. debt represent a payment in exchange for the use of borrowed funds, so how can this be thought of as a “transfer of American wealth overseas”? When any of us makes a purchase, whether that be for food, for clothing, or for anything else including interest payments on a loan, we do so in order to acquire something we value more than the money we give up in order to make the purchase. Voluntary exchange is a “positive sum transaction” with both parties to the exchange expecting to benefit. Thus, my discomfort with the notion of “transferring American wealth overseas.”

By: Harold

Harold — Mon, 14 Mar 2011 11:09:15 +0000

Depends on the value of chicken puree.

By: Neil

Neil — Sun, 13 Mar 2011 04:29:36 +0000

Of course, if the villagers are already indebted to farmer bob (china) for X chickens, they could pay that debt off and be no worse off than they were before. Unless, that is, the government-borrowed chickens were pureed. So it is really the fact that the government chickens were pureed that impoverished them. If not, they break even.

By: Doc Merlin

Doc Merlin — Sun, 13 Mar 2011 01:09:19 +0000

@Bob Murphy
“For example, your point rests on the view that if the government doesn’t pay down the $100 in debt, then it will have to tax by that much. But why couldn’t the government just cut spending elsewhere by $100 to pay off the debt?”

He makes that point later, sort of.
‘It’s spending, not debt, that can impoverish us, and that’s what we should be talking about.’

By: Neil

Neil — Sat, 12 Mar 2011 06:25:23 +0000

Will A,

A growing stock of chickens allows the villagers to borrow against their future wealth and consume more (or waste more, in Ken B’s example)now, but we are talking about debt growing more rapidly than the stock of chickens. The example simply asssumes a growth rate of chickens equal to zero for simplicity. Nobody would care about the deficit if the economy were growing at 5% and the debt were growing at 4%.