Public DebtPosted: January 4, 2012
Steve Landsburg has a different take on the “public debt doesn’t matter if we owe it to ourselves” claim. As usual, Steve highlights surprising truths that go unseen until he turns the spotlight of his intellect on them. And while I agree with him that the size of the public debt (measured relative to whatever benchmark) is more manageable in a growing market economy than many people (especially of late – but not always – conservatives) believe, the historical reality that growing public debt in the U.S. during the 20th century hasn’t led to the often-predicted calamaties is insufficient reason to regard a large and growing public debt as a problem insufficiently worrisome to warrant serious attention. See, for example, the link just above to Jim Agresti’s summary stats.
More generally, because debt financing does indeed allow politicians and voters today to saddle taxpayers tomorrow with the bill for today’s government expenditures, the likely result of ready recourse to deficit financing is more unwise government spending than would occur if current spending had to be funded by current tax receipts.
If A gets to spend B’s money to purchase goodies for A (or even for C), then A will not only spend more, but will spend more carelessly, than if a larger chunk of what A is spending is…