Re: Debtor Nation, another view

On 12 Oct 2005 13:01:11 -0700, "ruetheday@xxxxxxxxxx"
<ruetheday@xxxxxxxxxx> wrote:

>>A treasury bond is a financial asset for the holder. It is also a
>>liability of the Treasury (government debt). It may be less obvious
>>to some that a treasury bond is not a liability of future tax payers.
>>It can be rolled over indefinitely without affecting the tax bill.
>
>That would be true were it not for the fact that the government pays
>interest on Treasury debt, and those interest payments come from tax
>revenue.
>
>Now, I know you will counter by saying that the tax payments and
>interest payments are just one big circular flow within the economy.

Correct.

>However, this is the fallacy of division. It may be true of the
>overall economy, but it is not true of the individuals that comprise
>the economy. Not all taxpayers are bondholders, and many bondholders
>receive more in interest than they pay in taxes. Therefore, a net
>transfer within the economy, and potentially across generations, is in
>fact taking place.

Yes, of course. Any spending by the government, whether for goods and
services, welfare payments (the largest component), subsidies to
farmers, or interest on Treasury bonds results in a redistribution of
financial assets within the private sector. Do you have a formula for
government spending that can get around that?

Obviously some bond holders receive more interest than they pay in
taxes. So what? You seem to be implying that those who use their
savings to buy Treasury bonds gain some special advantage over those
who buy corporate bonds, for example. I think the fallacy of division
is yours, not mine.
.

Relevant Pages

  • Re: Debtor Nation, another view
    ... >>>A treasury bond is a financial asset for the holder. ... >>>liability of the Treasury (government debt). ... >>>to some that a treasury bond is not a liability of future tax payers. ... Interest on government debt is a one-way transfer from the ...
    (sci.econ)
  • Re: Refuting supply-side economics
    ... > Crowding out in financial terms is a myth. ... It is a fundamental mistake to think that public debt has the same effect on ... The interest paid to treasury bond ... You can say that taxpayers receive the use of borrowed funds that the government ...
    (sci.econ)
  • Re: Debtor Nation, another view
    ... >liability of the Treasury (government debt). ... >to some that a treasury bond is not a liability of future tax payers. ... interest payments are just one big circular flow within the economy. ...
    (sci.econ)