Re: Refuting supply-side economics

royls_at_telus.net
Date: 09/24/04 

Date: Fri, 24 Sep 2004 20:26:34 GMT

On Thu, 23 Sep 2004 23:35:16 GMT, William F Hummel
<wfhummel@comcast.net> wrote:

>On Thu, 23 Sep 2004 22:31:01 GMT, royls@telus.net wrote:
>
>>On Wed, 22 Sep 2004 22:16:27 GMT, William F Hummel
>><wfhummel@comcast.net> wrote:
>
>>>In the borrowing option, since there is no tax to pay up
>>>front, the taxpayers could invest 10 billion to earn interest equal to
>>>the interest due on the debt, and pay off the debt when due.
>>
>>??? That is of course just flat wrong. Private investors can't
>>invest one more dime in anything productive if government borrows
>>instead of taxing. They will use the exact same $10G that would have
>>been paid in tax to buy $10G worth of government debt. Hello? Give
>>your head a shake.
>
>Roy fails to see that the private sector (in the aggregate) buys
>government bonds with the dollars that the government spends.

So? It also pays taxes (in the aggregate) with the dollars that the
government spends.

>But few
>recognize this, so its not surprising he missed it.

?? What a load of nonsense. You claimed, above, that if government
borrows $10G instead of taxing it, the private sector can somehow
devote its untaxed $10G both to buying $10G in government debt _and_
to $10G in other investments. That claim is just false and stupid.

>The only reason the government sells bonds is to recapture its deficit
>spending, including interest payments on the debt. For a given level
>of spending, the only alternative is to increase taxes so there is no
>deficit. As explained earlier, to first order the cost to the private
>sector as a whole is the same for each option.

That is certainly true. The difference is in which _part_ of the
private sector foots the bill: the money-earning part, or the
money-owning part.

-- Roy L

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