> I can't fathom budgeting, right? So sometimes I spend money, buy a
> computor, put up a fence, and then, when the debt starts lookin' silly, I
> stop spending, and obsess on paying credit card bills with glee as soon as
> they arrive. Then the cycle starts again. Works for me.
One difference is the gov is perpetual. It can borrow more, pay more interest, and owe more every year, forever, as long as these trends do not often outpace the growth of the economy.
>
> It couldn't be bad that when the Big Cigars are trying to tell the us
> geezers-to-be that we'll have to wait till we're 72 to get our money, the
> country will be low on debt and ready to move into the deficit spending
The gov might be low on debt. The country is another matter. If people want to buy safe financial assets comparable to government bonds, they will seek them elsewhere. Somebody will end up in debt. For failure to find such lenders, savers will be obliged to invest, in effect, in more risky assets which entail investment projects that would otherwise be judged too flaky. The whole debate is on the extent to which the reallocation creates groovy new capital -- plant and equipment -- that makes the economy grow more rapidly. Insofar as it does, the whole enterprise of debt pay-down is worthwhile.
The downside is the scenario where debt paydown promotes more recession, less employment, and unproductive private investment. Then the lack of debt will not be of much help to the government.
Whether debt is paid down or not, after 2013 (according to projections) the Feds will have to raise taxes that will end up financing Social Security benefits. The difference between Clinton's scheme and a simple debt pay-down is that in the former case, these same taxes would redeem bonds held by the Trust Fund before being paid out as benefits. Without the scheme, the money would just shoot through the Trust Fund and pay benefits directly.
With a pay-down, taxes would be used pay off debt and pay benefits. Current projections say there's enough tax revenue to do this for 50 years or so, since surpluses are projected that far into the future (further, with different assumptions).
This means, however, that some reduction in surpluses now (at the expense of lower or negative surpluses later) is feasible without requiring extra taxes to pay Soc Sec benefits. So there is room for a discussion of raising public investment and other spending in the here and now. By two potential mechanisms, such a 'tilt' would cost less than it would appear in the way projections are normally done. First, it could raise average employment and income in the long run, which makes everything easier. (Analysts have been consistently wrong -- overly pessimistic -- about employment for some years now.) Second, some real investment by the gov could have the same effect.
Finally, even if there is no future economic gain to current spending increases, if they can be justified in ethical terms they could be worthwhile. Sort of like borrowing so Granny gets her wooden leg. As far as the accounting goes, it is better to feel good than look good.
> mode. And what about those medical/long term care bills? Won't having an
> empty credit card help the country deal with that?
No. The health care dimension is totally different from Soc Sec. Spending is growing too rapidly and something will need to be done about it.
>
> I was also real happy to hear that Clinton's seeming willingness to embark
> on a new arms race, is not backed uup by real money, though the selling of
> the idea is dangerous in itself. And I still think we are really
> pushing it with the rest of the world.
The money is real in the sense that there is a smaller cut than might have been imagined. And once initiated, some of these hardware projects can be very difficult to shut down.
>
> Now when you say that Clinton's follies could lead to slowdown,
> do you mean
> that this position would interfere with fiscal stimulation in the case of
> recession?
right.
> If you do, couldn't it also keep the Repugs and the infernal Balanced
> Budget Amendment at bay, and put the books in shape so that there's less
> excuse not to provide fiscal stimulus when the people are
> obviously in dire straits?
The books are already in shape. The Clinton budget is extreme overkill.
And no matter how good the books are, the other side will oppose fiscal stimulus. It's against their religion, and Clinton has signalled his agnosticism on the matter in this budget.
>
> It just seems to me that whether Clinton means to or not, he's setting the
> country up for demands for economic justice, IOW, they won't have the
> deficit to through in our faces anymore.
We're there now, and see what he's doing.
> 'Course I could be completely misunderstanding this.
>
> Perhaps desperate for silver linings-P.
You'll have to settle for moonbeams.
mbs