tag:blogger.com,1999:blog-1740670447258719504.post158672389302606535..comments2024-03-27T03:00:27.024-04:00Comments on Facts & other stubborn things: This is why we let the Scandinavians choose who gets the Nobel PrizeEvanhttp://www.blogger.com/profile/12259004160963531720noreply@blogger.comBlogger15125tag:blogger.com,1999:blog-1740670447258719504.post-59282714383976587602012-10-18T16:59:36.830-04:002012-10-18T16:59:36.830-04:00Was it Dean or Paul or both who said that taxes we...Was it Dean or Paul or both who said that taxes weren't a burden on future generations, because they paid those taxes to themselves, as owners of the bonds?Nick Rowehttps://www.blogger.com/profile/04982579343160429422noreply@blogger.comtag:blogger.com,1999:blog-1740670447258719504.post-45915828559414980792012-10-18T16:39:27.478-04:002012-10-18T16:39:27.478-04:00I dunno how Bob finds the energy. But then I remem...I dunno how Bob finds the energy. But then I remember: he's a young guy!<br /><br />I didn't get round to responding to Stickman. But I did see this similar post by Prometheefeu http://prometheefeu.wordpress.com/2012/10/18/taking-apples-from-future-generations-with-no-time-travel-and-no-debt/<br /><br />And I left the following comment: <br /><br />"“So again, it’s not the debt that impoverishes. It’s the tax.”<br />Yep. But that’s a bit like saying “It’s not the gun that kills people; it’s the bullet”<br />OK, that analogy is not exact. Because in some cases an increase in the debt does not require an increase in future taxes to service the debt (pay either interest or principal). Some guns fire blanks.)"<br /><br />BTW Stickman, even if the debt is perpetuities, and the taxes just pay the interest on the debt, the present value of the taxes=interest payments to infinity equal the current value of the debt. You only escape this result if the growth rate exceeds the interest rate forever, so you can rollover the debt+interest, never pay any extra taxes, and the debt/GDP ratio still falls.Nick Rowehttps://www.blogger.com/profile/04982579343160429422noreply@blogger.comtag:blogger.com,1999:blog-1740670447258719504.post-89631165703470465982012-10-18T14:35:24.584-04:002012-10-18T14:35:24.584-04:00"Well Current initially talked about RETIRING..."Well Current initially talked about RETIRING the debt, not just interest."<br /><br />No I didn't. Above when I said "In that case the taxpayer pays in the long run, because it's the taxpayer that supports interest payments on government bonds." I meant that the taxpayer pays even if the principle is never paid back. Take a perpetual bond for example. In the long run the debt maintenance cost far outweighs the principle in importance.<br />Currenthttps://www.blogger.com/profile/08645195276844244481noreply@blogger.comtag:blogger.com,1999:blog-1740670447258719504.post-46433668909206190452012-10-18T14:17:58.012-04:002012-10-18T14:17:58.012-04:00Ya - see my response above.
Current is talking ab...Ya - see my response above.<br /><br />Current is talking about retiring it. I think that's an unreasonable assumption. It's totally reasonable to talk about taxing to pay interest, but if we're going to include that reasonable assumption we oughta include the other reasonable assumption of growth. Why would you be borrowing without the prospect of growth, after all?<br /><br />As a practical matter - I agree with you.<br /><br />As a modeling matter, I don't see why we should be invoking assumptions that help your case but not ours. I thought we were abstracting from all that.Daniel Kuehnhttp://www.factsandotherstubbornthings.blogspot.comnoreply@blogger.comtag:blogger.com,1999:blog-1740670447258719504.post-2201056530840206772012-10-18T14:15:34.766-04:002012-10-18T14:15:34.766-04:00Well Current initially talked about RETIRING the d...Well Current initially talked about RETIRING the debt, not just interest. That was an overreaction on my part to the idea that we have to retire it.<br /><br />Look we've been abstracting away from all sorts of sustainability conditions the whole time. I see no reason to invoke them now unless they affect the arguments we're already juggling. I'm not intending to invoke a Ponzi scheme. But it seems wrong to require that tax payments to pay interest be included if we're not going to include growth.Daniel Kuehnhttp://www.factsandotherstubbornthings.blogspot.comnoreply@blogger.comtag:blogger.com,1999:blog-1740670447258719504.post-80503712873500795432012-10-18T14:14:50.314-04:002012-10-18T14:14:50.314-04:00Last thing: If you're allowing for the possibi...Last thing: If you're allowing for the possibility of perpetual rolling over of the debt, with no interest payments ever, then debt makes an individual family richer too. They consume a bunch today, put it on the credit card, and then let the credit card bill grow exponentially. Woo hoo!<br /><br />So, that's clearly not what Krugman was getting at, when he said debt makes a family poorer but not USA.Bob Murphyhttps://www.blogger.com/profile/04001108408649311528noreply@blogger.comtag:blogger.com,1999:blog-1740670447258719504.post-87339899743274049382012-10-18T14:10:54.722-04:002012-10-18T14:10:54.722-04:00Daniel:
==> Great point about Social Security....Daniel:<br /><br />==> Great point about Social Security. You're right, that's the opposite of what we're doing here. They *overtax* the young workers early on, running a surplus (on the SS program). We could argue that it was because of the favorable demographics etc., but I agree it's a good counterexample to my political point.<br /><br />==> Sorry, you are being goofy in your responses to Current. Of course when people say "higher government debt impoverishes the future" they have in mind the fact that the government is going to be using a portion of tax revenue in the future to service the debt. If you are saying suppose we have a Sameulson-esque sustainable Ponzi scheme, because the debt grows exponentially and the government never uses a cent of tax dollars to even pay some of the interest, OK, but that's clearly not the argument Krugman and Baker were making. Nick Rowe explicitly acknowledged the sustainable Ponzi scheme early on, btw.Bob Murphyhttps://www.blogger.com/profile/04001108408649311528noreply@blogger.comtag:blogger.com,1999:blog-1740670447258719504.post-77262618900332680392012-10-18T13:53:33.763-04:002012-10-18T13:53:33.763-04:00I'm not sure I understand your question. It co...I'm not sure I understand your question. It comes from income. Where else would it come from?<br /><br />This poses problems down the line if you don't also assume growth. People in this discussion have waved their hands at that problem by cutting off the spreadsheet before it overtakes income. Daniel Kuehnhttp://www.factsandotherstubbornthings.blogspot.comnoreply@blogger.comtag:blogger.com,1999:blog-1740670447258719504.post-16834269880953959752012-10-18T13:46:50.228-04:002012-10-18T13:46:50.228-04:00"Well I think it's easy to talk about it ..."Well I think it's easy to talk about it without taxes. You just roll over the debt."<br /><br />But if the debt has interest (and it must) then who's to pay the interest? Does it come from nowhere?<br />Currenthttps://www.blogger.com/profile/08645195276844244481noreply@blogger.comtag:blogger.com,1999:blog-1740670447258719504.post-6003149681714833602012-10-18T13:33:23.955-04:002012-10-18T13:33:23.955-04:00Well I think it's easy to talk about it withou...Well I think it's easy to talk about it without taxes. You just roll over the debt.<br /><br />What's hard to do is talk about it without growth. We've sort of solved that problem by cutting off the spreadsheet before that gets inconvenient :)Daniel Kuehnhttp://www.factsandotherstubbornthings.blogspot.comnoreply@blogger.comtag:blogger.com,1999:blog-1740670447258719504.post-76386954859967312842012-10-18T13:31:04.119-04:002012-10-18T13:31:04.119-04:00I haven't been following this closely, I didn&...I haven't been following this closely, I didn't know there was an agreement not to involve taxes. I can't see how we can talk about this stuff without involving taxes.<br /><br />Certainly we can't include taxes that are used to pay-off debt while excluding taxes to maintain debt.<br />Currenthttps://www.blogger.com/profile/08645195276844244481noreply@blogger.comtag:blogger.com,1999:blog-1740670447258719504.post-31011092877722670112012-10-18T12:35:49.840-04:002012-10-18T12:35:49.840-04:00Well right but there's been an agreement to ig...Well right but there's been an agreement to ignore growth and inflation and taxes. That's the whole point, Current.<br /><br />Bob invokes taxes very specifically here to make the result work out his way (and yet it still doesn't invalidate Krugman and Baker's point).Daniel Kuehnhttp://www.factsandotherstubbornthings.blogspot.comnoreply@blogger.comtag:blogger.com,1999:blog-1740670447258719504.post-65609172729769555442012-10-18T12:33:15.422-04:002012-10-18T12:33:15.422-04:00"What if the taxpayer never retires the debt ..."What if the taxpayer never retires the debt and the government never defaults?"<br /><br />In that case the taxpayer pays in the long run, because it's the taxpayer that supports interest payments on government bonds. Unless, of course, the government erodes that value of them with inflation, in which case the bondholder pays a share too. This is obvious and doesn't challenge Murphy's basic point.<br /><br />Currenthttps://www.blogger.com/profile/08645195276844244481noreply@blogger.comtag:blogger.com,1999:blog-1740670447258719504.post-39057123756303203532012-10-18T12:03:42.890-04:002012-10-18T12:03:42.890-04:00See the update too. I do think it was raised befor...See the update too. I do think it was raised before (by Bob no less) after reading an old post - but I think you are absolutely right to press the point. It certainly went over my head the first time.<br /><br />I'm not sure if sale of debt is a problem or not. Usually my type rails against Ricardian equivalence types clinging to all this intergenerational altruism. Seems weird to me to reprimand others for not clinging to it.Daniel Kuehnhttp://www.factsandotherstubbornthings.blogspot.comnoreply@blogger.comtag:blogger.com,1999:blog-1740670447258719504.post-43416976089038484742012-10-18T11:58:22.848-04:002012-10-18T11:58:22.848-04:00Well, I'm on the verge of blushing. Thanks for...Well, I'm on the verge of blushing. Thanks for the props DK... Now, I'm just waiting for Bob or Nick to swoop in and set me straight.<br /><br />Still, from my quick reading of the issue at least, the very issue of debt inheritance seems to be the crucial part missing from Bob's table.<br /><br />Regarding the name: Yes, of course. I had meant to change my open ID profile but obviously haven't gotten around to that yet. It's the blogosphere version of coming out of the closet :)Grant aka stickmanhttp://stickmanscorral.blogspot.comnoreply@blogger.com