Don Boudreaux on Public Debt


Tuesday March 27th, 2012   •   Posted by Emily Skarbek at 7:33am PST   •  

Readers of MyGovCost will likely be interested in this week’s Econtalk podcast with Don Boudreaux on the nature and significance of public debt.

Roberts and Boudreaux begin by discussing debt at the household level and then work to draw out which lessons apply to the spending of a federal government. In doing so, the discussion addresses arguments put forth by Krugman and others that “we owe it to ourselves”. In this view there is no burden of the public debt as long as the purchasers of U.S. debt are fellow Americans.

Boudreaux discusses the work of James Buchanan, particularly Public Principles of Public Debt: A Defense and Restatement, arguing that there is a burden of the debt and it is borne by future taxpayers. Boudreaux argues that all public expenditures have a cost. The difference between tax and debt financing mechanisms determine who bears the burden of that cost.

Spending over revenue is politically attractive because it pushes the costs into the future. As we have discussed before, our current budget is DAFT because Debts Are Future Taxes. And because taxes lie in the future (and those who will pay for them may not be alive yet or clearly identified) it is easier for politicians to push-off making the necessary actions to balance the budget.

The current budget proposal put forth by Paul Ryan is a prime example. As Nick Gillespie of Reason Magazine explains in this short interview, if we don’t reduce spending below 19% of GDP — we are in a debt increasing scenario. Period.

The conversation over at Econtalk closes with a discussion of the role of expectations in both politics and economics of debt finance. I highly recommend this podcast for anyone interested in understanding these issues.

Featured Image:
Courtesy of The Library of Economics and Liberty



Twitter Facebook Youtube RSS

Search


By linking to Amazon.com from this page, The Independent Institute earns referral fees of 4% to 15% from whatever you buy. Bookmark the above link and you can support the Institute when you do your normal shopping!

TIR

Categories

March 2012
S M T W T F S
« Feb   Apr »
 123
45678910
11121314151617
18192021222324
25262728293031