From: thf2@ellis.uchicago.edu (Ted Frank)
Newsgroups: talk.politics.theory,talk.politics.misc,alt.fan.rush-limbaugh
Subject: Re: National debt is not bad
Date: 25 Jan 93 04:08:54 GMT
Reply-To: thf2@midway.uchicago.edu
Organization: University of Chicago

In article <1993Jan25.014148.20969@oracle.us.oracle.com> kwee@oracle.uucp (Karl Wee) writes:
>Actually, I just put about 40% of my savings into gold, after observing
>Clinton for a while.  

Good luck.  Gold has been a notoriously poor investment in recent years.

>>Mass delusions of investors do happen, but I
>>think there's a difference between investors willing to invest in T-bills
>>and investors that pay thousands of dollars for Dutch tulips.  The risk
>>of this default is already calculated ex ante in the interest rate for
>>the treasury bills, and the low interest rates indicate that investors
>>as a whole don't believe there's a risk.
>
>The yield of long term T Bills have remained stubbornly high at 6 to
>8% even when interest rates were falling again and again during the
>past two years.  

That's just the yield curve in effect.  Long-term T-bill yields are going
to fluctuate less.

>>>For example, what happens when Baby Boomers start collecting social security?
>>
>>They're already talking about raising the retirement age.  They might
>>lose some benefits.  Or, they might finally get around to scrapping the
>>whole unworkable social security system and replacing it with something
>>else.
>
>If so, it's a de facto tax increase.  If we do it anyway, why don't we
>discuss tax increases to fix the deficit in a more direct and open manner?

Either way.  Social security is need of serious reform in the next thirty
years no matter what.

>>>Our dear "leaders" have been using the current surplus of SS (due to working
>>>Baby Boomers) as regular revenue to make the deficit look smaller.  
>>
>My point was that this is a COVER-UP ATTEMPT, and there can be no doubt
>about that.  This attemp will only make things worse for the govt when
>the day of reckoning comes.

If it's a "cover up," it's a notoriously poor one.  At any rate, I see
no reason why social security receipts and expenditures should be kept 
separate from the rest of government spending.

>>I never disputed that the deficit we currently have is an inefficient
>>one and a problem.  I only disputed the contention that all deficit
>>spending is invariably bad.  I think we need to distinguish between
>>a structural deficit (one which will exist even in *good* times), and
>>one caused by the state of the economy because of government stimulus...
>
>It has always been the structural deficit that we're talking about.  

Others haven't.  Certainly the balanced budget amendment Bush proposed
didn't.

>So
>what's your suggestion?  Let the govt keep its freedom to spend?  I
>contend that a balanced budget amendment is the much lessor of two evils.
>With this amendment, at least we'll have SOME control of the govt.
>Before you talk about my suggestion, what's yours?  Trust the govt for
>the nth time?

At the very least rework the balanced budget amendment so that the
budget is "balanced" on the basis of expected receipts and expenditures
for an economy undergoing some sort of "average" growth.

>Qualitatively this makes sense, but quantitatively, maybe not.  The
>govt, for example, can think of ways to reduce the deficit in ways least
>harmful to the economy.  This is what govt is really "hired" to do anyway.
>For example, cutting inefficient spending such as its huge subsidy of the
>health care industry.  It needs not become a bad vicious cycle if we do it
>early and gradually enough.  The key, however, is EARLY.  Also, the
>real safety net need not even disapear.  Ultimately speaking, the nation's
>economy is still rich enough to guarantee each person a low and minnimal
>standard of living throughout the austerity program.  There must exist some
>way for the govt. to translate this into a real system.  But again, doing
>it EARLY is the key to its success.

If it's possible to pass all of this as a package, I'd agree.  I have yet
to see a serious balanced budget amendment proposal that took the safety
net into account, or differentiated between the structural and real deficits.

I need to read some more of Eisner's works on the subject, but law school
doesn't give one much of an opportunity to do so.
-- 
ted frank                     | thf2@ellis.uchicago.edu 
standard disclaimers          | void where prohibited
the university of chicago law school, chicago, illinois 60637
Newsgroups: talk.politics.theory