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Politics : Formerly About Advanced Micro Devices -- Ignore unavailable to you. Want to Upgrade?

To: combjelly who wrote (218202)	2/8/2005 8:57:52 PM
From: TimF	Read Replies (1) \| Respond to of 1572107

Except that the deficit is here and now and future obligations are, well, in the future. Future obligations are in the future, that includes the payments on the deficit. At some point, the bonds are more attractive that regular business bonds, and so cost of capital for improvements goes up. This, at some point, means businesses can't afford to stay competitive, so the economy starts to tank. What you describe is called "crowding out" of private investment. It doesn't really apply here because right now that money is going to government bonds anyway. When individuals make the decision about it instead of the SSA then they might by government bonds (in which case the amount of borrowing from non social security sources will be reduced), or they will invest it in the private sector (providing money to the private sector that will balance out the "crowding out". Also higher taxes have a similar effect to crowding out. If you eliminated the deficit with a big tax increase you would reduce the demand of the government for borrowing money (removing the crowding out effect) but you would just take the money away from the private sector directly (doing just as much damage). Tim