Zakrosian, yes i did, I also suggested that we need to keep at last 20% or so of the GDP as debt, that just to keep liquidity (world wide). Without a good 2 Trillions in US government debt the worldwide financial markets will "freeze" up. It is not so much what will investors do, but it is a lot of what will other governments do with excess cash, there is a need of a place with the outmost security to "park money in", since Gold is absolutely dead in this respect (I also wrote about the intrinsic inflationary impact of backing money with gold), the treasuries and few other major governments securities are "it".
I would no worry about the government paying off all its debt, however, paying it too fast will bring an economic calamity, Last year, i actually wrote on SI that historically, budget surplus bring about recessions and sometimes worse. The reason is simple, budget surpluses serve as drain on the economy (more money being taken out than put back in). The best , IMHO, is to limit budgets surpluses to about 1% to 2% OF GDP, when it get above this, troubles are brewing.
I have also suggested that to avoid excessive surpluses the tax bracket of 28% should be gradually eliminated (namely raise the threshold from 15% to 28% until it reaches the next bracket of 31%, and if budget surpluses continue, then lower the 15% to 14% gradually to just 10%, before you even touch the 36% bracket). Only then start to think about cutting tax rates, but personally, I think that continuing and raising the 31% threshold would be a fairer approach, most people will then pay only 10% taxes (trully 25% with the "payroll taxes") on up to about $100,000.
Zeev |
