Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: gpowell who wrote (47717)	12/19/2005 2:41:25 PM
From: ahhaha	Read Replies (1) \| Respond to of 110194

Specifically, government borrowing doesn't change the level of demand. No. Only that a shift from taxes to borrowing result in no net change in the distribution of resources. I was only quoting Ricardo. But I disagree that a shift from tax sourcing to borrowing sourcing fails to alter distribution of resources. It gets government out of the countering of private wealth creation, and this shifts resouces both in quality and quantity. Indeed, government has become large because earlier the private sector wasn't bound fast by taxes. This pseudo classical tenet doesn't hold because it overtly assumes future output returns on varying tax rates will be the same. No. It only asserts that the same varying tax rates are in place. Huh? We are talking about two periods where in the first there's one configuration of government borrowing with an attendant tax rate and then there's an outcome period. Government borrowing must stay constant if the tax rate isn't changed, so one can't take tax rate as an arbitrary variable. That's true only up to equal tax rates between past and future. And that is the assumption in Ricardian Equivalence. True. I stated that in order to contrast that configuration with another one: more borrowing can be accommodated if taxes are simultaneously lowered. And here it is. You are asserting a change in marginal behavior. Yes. The variable isn't arbitrary which the pseudo classical assumption and the Neo Keynesian assumption had assumed it was arbitrary. Given that both borrowing and taxes come from private wealth you must be asserting that shifts in the tax/borrowing mix result in shifts of private resources into more productive uses. What is the basis for this belief? Synergy(the sum of the parts is greater than the whole because the sum is distributed over time where it can achieve new regimes of efficiency) that comes from individuals forming profit seeking groups where more profit can be realized. At no greater than the same tax rate government borrowing can increase because government's tax take is greater. I agree that a change in the marginal tax rate must surely lead to a change in marginal behavior. Then you must take back, "Only that a shift from taxes to borrowing result in no net change in the distribution of resources".