From: thf2@ellis.uchicago.edu (Citecheck Hell)
Newsgroups: talk.politics.misc,alt.politics.perot,alt.politics.elections
Subject: Re: All deficits are not created equal.
Date: 5 Oct 92 17:17:27 GMT
Reply-To: thf2@midway.uchicago.edu
Organization: University of Chicago Computing Organizations

In article <1992Oct5.143523.27298@aio.jsc.nasa.gov> walker@superboy.jsc.nasa.gov writes:
>   Now that paying the interest on the debt is the largest item in the
>   budget I am wondering this:  Could the government get funding to buy
>   a home?  Let's look at the criteria:
>
>	1) The house payment cannot be more than 28% of your monthly
>	income.
>
>	2) The house payment plus all your other debt payments cannot
>	exceed 33% of your monthly income.

On the other hand, if you had a two-hundred year record of a perfect
credit history....

And if you had several billion dollars of assets....

I'm sure the banks would make an exception.

In fact, one can see quite evidently that the banks make a huge
exception, because interest rates are so low.  Why do you think
the government is paying less than 7% instead of mortgage rates, hm?

>   Now don't get me wrong I don't think that getting rid of the deficit
>   and the debt will fix our current economic problems.  They have very
>   little to do with the current deficit and debt.  But why should that
>   excuse this generation to squander money and create the next
>   generations economic problems?
>
>   I think this is what Perot has been saying.  Getting people back to
>   work and fair trade practices are what will cure our current
>   problems.  The debt and the deficit are our childrens problem, that
>   we should not allow.

You're confusing two issues.  It's bad when we have a budget deficit
that, in effect, is financing our trade deficit -- the budget deficit
is being used to keep taxes low, pay for a lot of wasteful programs
for farmers, and letting consumers purchase Japanese VCRs and cars.

That doesn't mean the budget deficit is in itself bad.  To take a
famous example, it's widely (though not universally) believed that
a dollar spent on HeadStart saves four-five dollars later in welfare
and prison costs.  If you could borrow money at 5% a year to get
this double-digit return on your investment, wouldn't you?  Deficit
or no deficit, debt or no debt?

This is why Clinton has the right idea.  He suggests splitting the
government budget into two accounts -- a "present" account that pays
for things like government employee salaries, farm subsidies <bleah>,
and the like; and a "future" account that pays for infrastructure,
educational investments, and other tangible assets.  The present
accounts would have to be balanced, while it would be less of a priority
to do so for the investment accounts.

Looking at the situation as a "deficit" problem is all wrong -- not
a single business in the country looks solely at cash flow.  We could
sell the Grand Canyon for $200,000 to the Germans, and the national
debt would be reduced $200,000 -- but would we really be better off?
No -- we have $200,000 more in cash, but an immeasurable sum less in
national assets.  Similarly, we could "save" money by refusing to pay
for schools or highways, but when the money is spent (increasing the
deficit) it doesn't go down the drain -- our human capital is increased
in the first instance, and we have an actual highway in return for our
money in the second case.

(The other thing to recognize is that the deficit problem isn't as
serious as it looks -- a large part of the interest component is 
really an inflation component, and if there's 4% inflation, then one
should recognize that a $3 trillion debt is really $120 billion less
than it used to be.)
-- 
ted frank | thf2@midway.uchicago.edu 
also at quibeaux@uchicago.edu | standard disclaimers
the university of chicago law school, chicago, illinois 60637
ajax crypto-analyzer -- warning! remove all chicken bones first
Newsgroups: talk.politics.misc