debt and bonds

[Max Sawicky]

"... As the debt is paid down, the interest rates are dropping. The more
they drop, the less is required in the Federal Budget to service the
remaining debt. That leads to still bigger surpluses, leading to still
more aggressive debt repayment. The whole process can accelerate rapidly.
This seems dandy. Is there any downside to this process?"

	--30--

yes.  The evisceration of the public sector, since the debt
pay-down priority trumps everything else.  Also the exposure
of the Soc Sec Trust Fund to privatization schemes.  Also
fiscal destabilization when the economy slows down.

In a sense, debt pay-down is privatization too.  The Gov
takes its savings and plows them into the private capital
markets.  In the Bush variation, the same thing occurs,
but through the filter of individualized accounts. The
capital markets get the dough either way.  Bush is really
humping for the people who would benefit from fees, loads,
and the like from the accounts.  Against this relatively
narrow interest is the deeper one of debt repayment. Gore
has the advantage because the 'deep' motive is better served
by someone not promising as much in tax cuts.

In the Clinton variation, at some point after a dozen
years when debt is repaid, the surplus would be used
by the Gov to buy private sector financial assets. That
would be the opposite of privatization, but we're not
there yet.

mbs