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To: Neocon who wrote (407)	11/13/2002 2:20:44 PM
From: The Philosopher	Read Replies (2) \| Respond to of 7936

The difference is that industry, and individuals, are constrained in the loans they take out by their earnings prospects. There is a natural limit on their ability to borrow money based on what lenders think is their ability to repay those loans. The government has no such constraint, because of its ability to increase taxes at will. Lenders will lend money to governments (i.e. investors will purchase government bonds and notes) without regard for whether those loans are prudent under existing circumstances because they believe that governement will choose or be forced to raise taxes to whatever level is necessary to pay off those debts in future, because the government basically can't just choose someday to go bankrupt and start over. There are thus effectively no market constraints on the government, which makes comparison of government borrowing and private borrowing meaningless at best and deceptive at worst. The exception, and the better analogy, of course, is revenue bonds (as long as they are not also secured by general obligation). I have no objection to revenue bonds, because there investors are making a prudent evaluation of the expected success of the project and evaluating whether the bonds are a prudent investment. But general obligation borrowings backed by the "full faith and credit" of the government and nothing else, no.

To: Neocon who wrote (407)	11/13/2002 7:56:49 PM
From: Tom C	Read Replies (1) \| Respond to of 7936

If the growth of debt, in constant dollars, is about the same or less than the growth of GDP, there is no reason in the world to raise taxes, except in the ordinary sense that when people have more income, they pay more. If GDP growth markedly exceeds the accrual of deficits, you will pay down the debt, net. I'm not sure why you use GDP in your arguments. Why not compare debt to federal revenues? I found this interesting: bea.doc.gov The major contributors to the increase in real GDP in the third quarter were personal consumption expenditures (PCE), equipment and software, government spending, and exports. The contributions of these components were partly offset by a decrease in nonresidential structures. Imports, which are a subtraction in the calculation of GDP, increased. So consumer debt and government spending increase the GDP and by your reasoning suggests that the government can carry a larger debt? Maybe you can explain to this non-economist why GNP has anything to do with allowing the people of this country to carry more debt since we are the government.

To: Neocon who wrote (407)	11/14/2002 11:27:15 PM
From: Lazarus_Long	Read Replies (2) \| Respond to of 7936

If GDP growth markedly exceeds the accrual of deficits, you will pay down the debt, net. That's what doesn't happen. Gov't doesn't reduce debt when times are good. "HEY! We've got more money coming in! Let's spend more! (And make more of our constituents happy, assuring out re-election.)" You know that. We all know that. We've seen it many times. Debt is drug to politicians. THe more they get, the more they want. In a robust economy, and with some prudence, there is no reason to resort to currency inflation or go bankrupt. In an ideal world, that's true. This one isn't it. In any case, the possibility of liquidating assets to reduce indebtedness hedges against either alternative, as well. What are you saying? The gov't is going to sell the highways? The bridges? The Capitol building? B1Bs? Are you serious?