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To: Peter J Hudson who wrote (91166)	1/4/2001 5:33:22 AM
From: Don Lloyd	Respond to of 152472

Pete - ...I find it hard to believe that I am the only person you have ever heard suggest that we should pay down the national debt.... It was your belief that paying down the debt would actually result in tax relief, meaning an actual reduction in tax rates, as opposed to additional spending, that I was questioning. ...Your discounted present value equation makes the tax relief equal the payments made referenced to the date the debt is paid off. It doesn't account for the fact that the reduction of interest payments continues indefinitely, just as the tax burden created by the interest payments continues indefinitely if we don't pay down the debt. No, each and every interest payment would be separately discounted and summed to a present value. The number of terms would be infinite, but the sum of the discounted present values would be finite. Think of the alternative. Instead of paying down the debt in the present, make an investment by loaning the money out at the same interest rate and conditions as the debt. The debt and your loan have interest payments that exactly match one for one in both payment date and payment amount. By paying down the debt, every interest payment you avoid is exactly matched by a payment on the loan that you have foregone. If you pay down the debt, there is no future activity at all. If you make the investment, the interest payments that you receive on your loan are exactly sufficient in amount, and precisely placed in time, to satisfy the requirements of the debt payments. Thus there is once again no effective future net activity, just as if you paid down the debt. Regards, Don