Don Boudreaux rightly points out that "debt financing does indeed allow politicians and voters today to saddle taxpayers tomorrow with the bill for today’s government expenditures" what is unseen, or perhaps seen and left unspoken, is that politicians also spend money on public investments that allows taxpayers tomorrow to live considerably more prosperous lives than taxpayers today. The biggest government consumption programs - Social Security and Medicare - are funded by current taxes, not borrowing.
Now - why does government make those public investments? Can't private actors make those public investments? To a certain extent, yes, but important externalities introduce obstacles to that, and representative government is one important institution that has emerged and evolved that solves some of these problems, as I highlight in this old post (a favorite of mine from 2011).
Now Don accepts externality logic. Indeed, he uses it in the next clause of that sentence: "the likely result of ready recourse to deficit financing is more unwise government spending than would occur if current spending had to be funded by current tax receipts."
This blog has never challenged that point, and has always emphasized the problems of political allocation. What I have trouble understanding is why Don accepts the externality logic on the one hand, but rejects it on the other? Why does he talk about the costs imposed on the future but not the benefits of public investment? I really, truly, don't understand.
I think we should say this: "Deficit spending gives the bill to future generations, so it can encourage overspending, but externalities in these investments encourages underspending. The total effect is ambiguous so we shouldn't (1.) count only the costs when we talk about deficit spending, we should also count the benefits, and (2.) not pretend that it's obvious this goes in one diretion or the other when it comes to social welfare".
Liberty and Equality in Political Economy
2 hours ago