On May 18, 2009, at 2:19 PM, Max B. Sawicky wrote: > You seem to imply that the availability of Gov securities reduces > consumption > of the rich. If not, if their saving is no different, how are they > richer?
"The rich," at least the American rich, haven't been financing our deficit. Their holdings of Treasury securities ex-savings bonds, went from 6.6% of GDP at the end of 1999 to 0.6% at the end of 2008. The rest of world sector financed almost 80% of the increase in Treasury debt. >>>>>>>>>>>>>>>> MBS: You were talking about no-crowding out and the increased wealth of the rich. Now you're talking about the increased wealth of foreigners. O.K. let's sail to Open Economy Land. I claim, with no deficit finance, public spending in the present decreases, to the net disadvantage of the non-rich. With deficit finance, we get more spending in the present, while in the future the top quintile of income tax payers pays more dough to foreigners. I also claim there is little impact on future non-interest spending because future interest payments for any given, fixed increase in debt are an ever-decreasing share of GDP and tax revenue. Which state of the world do you prefer? > Re: the alleged debasement, the initial borrowing finances something. > Borrowing > v. taxes just changes when the bill is paid. Present value of Gov > spending is more > likely to be increased by the use of borrowing, not reduced, since the > bill is > presented to future, richer generations. You're ignoring debt service, which was over 4% of GDP in the Reagan years, and a rising debt/GDP ratio. It was 32% of GDP when Bush took office, and 44% when he left. It's likely to rise past 60% fairly soon. And what has this debt been financing? Tax cuts for the rich and a military buildup. What will the future increases in debt finance? A stim program, yes, but also lots of bank bailouts. None of that makes us richer, or gives us any reason to be optimistic about the greater wealth of future generations. Doug >>>>>>>>>>>>>>>>>>> MBS: You example goes to GOP policies, not deficit finance in general. This year and next year we'll see a big non-defense spending surge. Otherwise your example goes to the efficacy of the bail-outs. As military build-ups go, Obama's is relatively modest. Of course Afghanistan is a quagmire I can believe in. If we always had right-wing govts and budgets, there would be less of a liberal case for deficit finance. I think this was Wicksell's motivation for opposing big Gov. _______________________________________________ pen-l mailing list [email protected] https://lists.csuchico.edu/mailman/listinfo/pen-l
