> Doug wrote:
>
>> What's so wonderful about chronic deficit spending, really?
>
> Think of it by analogy with an individual.
But a society is not an individual. It doesn't have a life cycle like this:
> If you are about to
> retire, your income is going to be low, and you don't want to leave
> debt to your children, then you have to adjust your spending, rather
> than borrow. If you are young and about to graduate from college and
> need money to rent suit and tie to go to a job interview, it'd be
> silly not to borrow. Future income should allow you to repay the debt
> (unless the prevailing interest rate is too high).
Presumably the income of a whole society increases at a fairly constant rate, unlike what happens to an individual from age 20 to 45 or 50. So this analogy makes no sense. You could make an exception, maybe, for a rapidly industrializing society, but that's not relevant to the U.S. or any other mature rich economy.
If you run, say, a deficit of 2% of GDP (revs = 18%, exp = 20%), in an economy growing at 5% a year, and roll over the old debt and issue new to fund the deficit, you end up with a debt/GDP ratio of 30% after 25 years (if you start year 0 with no debt). Debt service climbs steadily from 0% to 1.5% of GDP. Aren't there better uses for 1.5% of GDP?
> I agree with your suggestion that taxes for the rich should be higher.
> Depending on political forces, we may want both, higher taxes for the
> rich and reasonable, responsible deficit spending. However,
> politically, deficit spending may be easier as a means to redistribute
> income in favor of the working people. I guess it depends.
But bond interest is an upward redistribution - see the Reagan years. Tax to spend can be a downward redistribution, if you spend it right.
Doug