tag:blogger.com,1999:blog-1740670447258719504.post4435064310667691463..comments2024-03-27T03:00:27.024-04:00Comments on Facts & other stubborn things: Krugman: Public debt has distributional and incentive problemsEvanhttp://www.blogger.com/profile/12259004160963531720noreply@blogger.comBlogger4125tag:blogger.com,1999:blog-1740670447258719504.post-49347632258267512552012-11-24T19:42:37.506-05:002012-11-24T19:42:37.506-05:00@Nick_Rowe: That's true, but your first paragr...@Nick_Rowe: That's true, but your first paragraph actually includes a well-concealed gift transfer. When you "loan" money at 0%, you're really just giving the money away. So that could be rephrased as, "some really generous dude gifts the government 10 apples. The government gives them to old people. Every year the government asks the dude or his heirs if they want anything back. They say no."<br /><br />It changes things a bit when you include a give-away fairy :-)Silas Bartahttps://www.blogger.com/profile/09480427306873460464noreply@blogger.comtag:blogger.com,1999:blog-1740670447258719504.post-31307637314077404722012-11-24T17:58:09.094-05:002012-11-24T17:58:09.094-05:00A simpler version of Ken's example: the govern...A simpler version of Ken's example: the government borrows 10 apples at 0% interest, gives them to the old, then rolls over the debt forever, without increasing taxes. With 0% growth, and 0% interest, the debt/GDP ratio stays constant. The old of the first cohort are 10 apples better off, and nobody is worse off.<br /><br />This is the borderline case between r < g, (Samuelson 58) where debt is too low, and an increase in the debt/GDP ratio requires permanent transfers (negative taxes), and cases where r > g, where an increase in the debt/GDP ratio requires permanently higher taxes.<br /><br />It's the taxes.<br />Nick Rowehttps://www.blogger.com/profile/04982579343160429422noreply@blogger.comtag:blogger.com,1999:blog-1740670447258719504.post-51763060314659826442012-11-21T18:04:46.982-05:002012-11-21T18:04:46.982-05:00Woo hoo! At last I am able to wholeheartedly agree...Woo hoo! At last I am able to wholeheartedly agree with you Daniel on the debt stuff. I completely agree that this isn't at all a problem for Krugman's post. Kling is *not* showing that the debt can burden our grandchildren in a way for which Krugman didn't already allow.<br /><br />BTW I strongly suspect Ken B. is wrong on his "counterexample" but I haven't had time to work with such examples in my preferred template, so I shall officially remain silent on that count.Bob Murphyhttps://www.blogger.com/profile/04001108408649311528noreply@blogger.comtag:blogger.com,1999:blog-1740670447258719504.post-52861288006958564322012-11-21T09:35:40.732-05:002012-11-21T09:35:40.732-05:00Oh for pity's sake. Krugman could not have bee...Oh for pity's sake. Krugman could not have been clearer that there are incentive and distributional effects. No-one in this debate has denied large scale debt can cause problems with those. <br /><br />I pick apart Bob's OLG thing here http://kenblogic.blogspot.com/2012/11/a-war-on-public-debt-and-paul-krugman.html<br /><br />and here http://kenblogic.blogspot.com/2012/11/my-latest-salvo-in-ongoing-war-at-free.htmlKen Bhttps://www.blogger.com/profile/12976919713907046171noreply@blogger.com