Governments should not be allowed to borrow money

1. Gannon: "Democrats advocate for increased taxation of the rich in exchange for more government services like obamacare. Republicans advocate for decreased taxation for everyone by cutting government services like medicare for elderly and also food stamps." Brian: But quite obviously, democrat governments do not raise taxes enough to pay for all of their spending, while republican governments do not cut spending/services enough to be fully paid for by their reduced taxation revenue. How do I know this? Because if they did, there wouldn"t currently be a massive government deficit or a massive pile of government debt! Consequently, I"m really not sure what you"re getting at with this bizarre argument" 2. Gannon: "The government borrows money by distributing treasury bills and bonds and in return, after a set period of time, they pay an interest fee in exchange for someone loaning money to them. Governmebs don't steal investements." Brian: I never stated that the government steals investments, I say that they waste investments. The two are completely separate concepts. I do not doubt that private investors willingly lend the government money; what I doubt is the contention that this money can be used better by the government than it could be if it were invested privately, for the reasons stated above. Gannon: "Actually, there's this thing called the legislative branch (congress) that decides which roads can be built or not and they are divided into subcommitees, which do a bunch of research and cost benefit analysis so yea, there actually is some rational thinking involved." Brian: Ah, congress, the paragon of rational economic decision-making" Sarcasm aside, congressional subcommittees can certainly engage in political calculation, they just cannot engage in economic calculation. Congressmen probably have a decent feel for what projects to support in order to improve their chances of re-election; but they do not have a method of determining whether the way they expend the resources under their control is beneficial for consumers in the society"s free-market, according to these consumers" own subjective valuations and purchasing decisions. This is what the profit/loss test of private business on the free-market accomplishes, something that the government does not generally make use of. 3. Gannon: "According to what democratic theory? We can't pay for the debts of our forefathers who gave us this wonderful country and all the infrastructure, oppurtunity, and other services? I'm prettyy sure that the previous generation of voters made much of this infrastructure possible by borrowing for the future benefit." Brian: Firstly, I"ve yet to have come across a democratic theory that says that the dead hand of the past can restrict the sovereignty of present voters if what was done in the past was for the present voters" "own good". Such a theory is not inconceivable, it just does not seem very "democratic", as I understand the word. Secondly, it wasn"t the debt of previous generations that made all of these good things possible, it was the savings of the previous generation that did this. There can be no debt and no investment without someone who is willing to lend their savings. Thirdly, I dispute your implication that it was the governments of the past that enabled all of these good things; I think that it was private individuals and organizations, interacting on a free-market, that made the western world great. I suspect that whatever infrastructure that governments of the past built, private enterprises of the past could have built even better and more economically, if only the government had allowed them to. 4. Gannon: "yep 6% a biiiiiig percentage. (for interest payments on government debt by the US Federal Government)" Brian: Um, yeah, 6% is pretty big for a government that spends over 20 percent of the world"s biggest economy"s annual GDP every year. That comes out to 1.2% of the country"s annual GDP spent on maintaining a debt that is at best useless, at worst actively harmful. http://www.usgovernmentspending.com... Extra Gannon: "What about i dunno, let's say we go to war, what do we do then? How do we start producing tanks and helicopters if were not allowed to borrow money? Almost every major conflict required the US government to borrow some level of money in the form of war bonds so they can finance their military operations that will pay off later. Are you saying that the US federal government shouldn't try and protect itself the best it can during war? Or do we raise money by imposing ridiculously high tax rates to pay for the war that might ruin peoples lives back home instead of responsibly borrowing money and paying it back steadily over the long term then robbing all the coffers of the present generation?" Brian: The majority of the conflicts you are referring to were offensive, not defensive, wars. I think that the world would be a much more peaceful place if the people voting for a war knew they had to finance, immediately and out of their own pockets, the full costs of that war. Would make people think twice before supporting silly conflicts in Vietnam or the Middle East, among others. As such, to a certain extent I see this as a positive, not a negative. That being said though, every war throughout history, whether financed by debt or not, used the wealth of present generations as war material. If a war is financed by debt, it is the saved-up capital of people that is tapped, if by income taxation, it is the current streams of income of people. But there is of course a way to tap saved-up capital via taxation for a war effort: just institute a temporary wealth tax, say 1% of everyone"s saved-up capital, to be contributed to the government"s coffers immediately. I would recommend not embroiling your country in expensive conflicts to begin with, but this option is always available if absolutely necessary. Also, nowadays, all countries really need for real defense is a modest nuclear arsenal. Such countries have proven so far to be invasion-proof, for very good reason. Maintaining such an arsenal would be a regular, not an extraordinary, expense, and compared to the vast amounts spent by the US government on the military today, it would be comparatively piddling. Gannon: "Government deficits are good sometimes, especially when there needed during recessions to spur growth. Look at us, America's head out the recession and we're doing great! thanks to obama and his stimulus package." Brian: I disagree, I think that America would be doing much better without stimulus packages. Of course, the only way to really test our respective contentions empirically would be to go back in time and re-run history so that a stimulus package was not used in 2008, and see what happened. This is impossible, so this question can only be settled via economic theory. Specifically, which makes more sense: Keynesian economic theory, or Austrian School economic theory? This, I think, is a topic for another debate though.