September 20, 2005
Defending Debt
AlexC emails a link to a very interesting article in RedState.org where Nick Danger preaches heterodoxy under the title "I. Heretic."
To me, the exciting thing about the blogosphere is that you can challenge conventional wisdom, get a hearing and people can agree or disagree.
"Nick " tells us that the national debt is not bad (I agree), that President Bush has a keen understanding of money and the ability to use it as a weapon. (I agree up to a point), that pork, per se, is not bad (losing me a little), and that pragmatism precludes small government (he actually sounds like me).
It's a good piece and well worth a read. I'll excerpt the part I most agree with. "What about saddling our beloved children with the national debt?"
Our children are not going to have to pay it back. Institutions are not individuals. For our purposes, institutions are immortal. If some of their debt comes due, they simply roll it over. They can do this perpetually. IBM probably has debt on its books that's been there since the 1920's. It's been rolled over several times. No one cares. So long as IBM sees opportunities for investing cash that return more than the interest rate, they will never pay the debt back... they'll just keep rolling it over. And then the Sun burns out. This can be a difficult concept for non-finance-types to understand. But it is crucial to understanding what's going on here. So long as the U.S. economy keeps growing... so long as we have opportunities to invest cash in ways that earn a higher rate than we have to pay in interest... we should keep rolling over our debt, and adding more as we can, forever. All these people who moan about the chillrun do not understand this game. The chillrun aren't going to pay it back. They don't have to. They're going to roll it over, and add more of their own. As will their children. Until the Sun burns out.
This needs to be said. The Democrats want to raise taxes to pay for Katrina. I'd like to cut spending, but increasing the deficit a half a percent of GDP is a much better choice than turning our back on successful tax cuts.
Economics and Markets Posted by John Kranz at September 20, 2005 3:10 PM
I remember being staunchly anti-deficit in my younger "read: Reagan era" days, but my motive was government spending cuts. Back then we were told it would take ninety-nine Hobbit lifetimes to "pay off" the debt. Then, miraculously during the Clinton era, it was forecast to become a budget surplus in less than a decade. If this thing is that volatile then I'm far less inclined to lie awake worrying about it.
Posted by: johngalt at September 21, 2005 3:39 PMI think the deficit was equal to "small government" in the hands of President Reagan or Speaker Gingrich.
Now it is not (you and I both wish it were). Now, "the deficit" is a code word for the Democrats to raise taxes.
Better to ride the big government conservative wave than raise taxes and spoil the economy (like our beloved legislators would cut spending even then).
Posted by: jk at September 22, 2005 11:38 AM | What do you think? [2]