"That is, if government builds a bridge today by borrowing money, who ultimately pays for the bridge? Buchanan showed, I believe conclusively, that the bridge is paid for by the people whose taxes rise in order to pay off the bondholders (that is, in order to pay off the creditors who lent the money in the first place, or the successors of these creditors). Debt issued today, therefore, is a burden on future taxpayers."Definitely. I agree completely, which is why when this discussion started many months ago I for one said that I am agreeing with Lerner, not disagreeing with Buchanan. I think I came out saying that all of them were right on the claims they were making.
If Lerner/Krugman/Baker actually disagreed with this, I would be dumbfounded. I would lose a ton of respect for them.
As I said in the last post, think of how insane it would be to disagree with this. If you actually disagreed with this you would want the government to borrow 100% of GDP and just buy everything that everyone wants for them. Why not? Surely there are going to be efficiency losses, but if it's really costless why quibble over some efficiency losses.
Obviously no one is arguing this.
No one disagrees with this point that Don makes. But I'm glad that at least we're on firmer ground than we were yesterday afternoon.
[UPDATE 2: I wrote this paragraph thinking of what Don wrote about taxpayer reaction to anticipated taxes on future generations - but I see he linked to the '58 book and not the '76 article... anyway, this is still an important point about Buchanan's views on the issue but a little separate from the argument Don is addressing in the linked post] Note the context in which all this arose for Buchanan (something which I think is often lost in debt debates): Buchanan was not a fan of strict Ricardian equivalence (like every sane economist of course he thought people were forward looking, but he was doubtful of the veracity of strict Ricardian equivalence). That's just one more reason to like him, IMO! I'd have to reread the article, but I believe it's best to think of Buchanan's assertion here as a response to Barro rather than a response to Lerner, as Don frames it.
UPDATE: The key to remember - something we were reminded of regularly during the campaign - is that "future taxpayers" and "future generations" are two different groups of people. I know it doesn't seem like it sometimes, but creditors are people too!