I'd had thoughts along these lines in my head before, but this is the first time I've seen them written out. Thanks!
One slight issue that is missed is that there are definitely going to be real costs associated with the rearrangement of resources. If we want society to have more health care, some currently unemployed workers will have to train as doctors to take care of the patients. (If we just want the health care to be centrally funded though, no new resources are getting used, just the costs for health care are going through the government instead of through insurance companies.)
I agree, but I think "rearrangement cost" can be broken up into two categories:
1. The "real world" resources necessary to physically move stuff to another location/train doctors/etc.
2. The psychological cost associated with getting people to do stuff they wouldn't otherwise do.
The first definitely requires real resources, but I'm not sure the second does. If the government borrows and pays me to dig ditches, I don't think any real resources are being wasted getting me to change tasks per se, if that makes sense.
"every dollar we borrow now is a dollar that our children can’t use for themselves. Even more, it’s a negative-sum trade since we have to pay interest on top of the principle we borrow."
Principal, not principle.
It's not necessarily negative-sum, since there might be an investment that only the government can make, which costs $1.0B today and pays off $1.2B in ten years at the cost of $1.1B in future dollars. (But generally government spending is less socially beneficial than private spending.)
To me, the most compelling argument in favor of deficit spending is that it's a transfer of wealth from future Americans to present Americans, and future Americans will (probably) be wealthier than present Americans due to technological progress and economic growth, so they are sort of a form of progressive taxation / wealth redistribution.
I don't know what I think about the wealth transfer argument. We can't literally borrow resources from our future selves, so borrowing money doesn't correspond to reaching forward in time and transferring real wealth. On the other hand, at the individual level people are clearly made better off by lending money to the government in exchange for interest. I just don't think this applies intergenerationally.
Yeah, I am having some trouble resolving how this would work out. On the one hand, we can't make there be more resources in the present by stealing from the future, and we can't consume goods that haven't been produced yet.
On the other hand: imagine someone born in 2000, and someone born in 2050. In 2070 the first person is 70 years old and the second person is 20. The government might enact a tax on 20-year-old workers to pay benefits to 70-year-old retirees. This clearly benefits the first person at the expense of the second. Alternatively, imagine the government gives out free stimulus checks to 20-year-olds in 2020 (including that first person), runs a deficit to pay for this, holds onto the debt for 50 years, and enacts a tax on 20-year-olds in 2070 (so the second person pays for the stimulus from 2020). This second wealth transfer seems totally identical to the first once you account for interest/inflation/present value/etc. (Maybe I'm wrong, I very well might've missed something there.)
Does that work beyond the timescale of human lifespans? Can we spend money in 2021 and have our rich descendants pay it off in 3000? This seems wrong somehow; there is a fixed quantity of stuff in 2021 and we can't get more by taxing future people.
In your stimulus check scenario, the actual goods and services being purchased by the 20 year olds in 2020 are essentially being taken away from other, presumably older people in 2020. In essence, it is a transfer of resources from the old to the young, both in 2020. The financing mechanism doesn't change this fact, I don't think. In the first scenario, resources are being transferred from the young to the old, so these seem very different.
Thing both of us have missed so far is that we CAN borrow from the future by running a deficit-financed trade deficit now. This is a transfer of real resources from a foreign country to the U.S. in exchange for a reverse transfer at a later date. Implicitly, I think this is what is happening in the contemporary U.S.
I'd had thoughts along these lines in my head before, but this is the first time I've seen them written out. Thanks!
One slight issue that is missed is that there are definitely going to be real costs associated with the rearrangement of resources. If we want society to have more health care, some currently unemployed workers will have to train as doctors to take care of the patients. (If we just want the health care to be centrally funded though, no new resources are getting used, just the costs for health care are going through the government instead of through insurance companies.)
I agree, but I think "rearrangement cost" can be broken up into two categories:
1. The "real world" resources necessary to physically move stuff to another location/train doctors/etc.
2. The psychological cost associated with getting people to do stuff they wouldn't otherwise do.
The first definitely requires real resources, but I'm not sure the second does. If the government borrows and pays me to dig ditches, I don't think any real resources are being wasted getting me to change tasks per se, if that makes sense.
"every dollar we borrow now is a dollar that our children can’t use for themselves. Even more, it’s a negative-sum trade since we have to pay interest on top of the principle we borrow."
Principal, not principle.
It's not necessarily negative-sum, since there might be an investment that only the government can make, which costs $1.0B today and pays off $1.2B in ten years at the cost of $1.1B in future dollars. (But generally government spending is less socially beneficial than private spending.)
To me, the most compelling argument in favor of deficit spending is that it's a transfer of wealth from future Americans to present Americans, and future Americans will (probably) be wealthier than present Americans due to technological progress and economic growth, so they are sort of a form of progressive taxation / wealth redistribution.
Thanks, should really hire you as a copyeditor.
I don't know what I think about the wealth transfer argument. We can't literally borrow resources from our future selves, so borrowing money doesn't correspond to reaching forward in time and transferring real wealth. On the other hand, at the individual level people are clearly made better off by lending money to the government in exchange for interest. I just don't think this applies intergenerationally.
Yeah, I am having some trouble resolving how this would work out. On the one hand, we can't make there be more resources in the present by stealing from the future, and we can't consume goods that haven't been produced yet.
On the other hand: imagine someone born in 2000, and someone born in 2050. In 2070 the first person is 70 years old and the second person is 20. The government might enact a tax on 20-year-old workers to pay benefits to 70-year-old retirees. This clearly benefits the first person at the expense of the second. Alternatively, imagine the government gives out free stimulus checks to 20-year-olds in 2020 (including that first person), runs a deficit to pay for this, holds onto the debt for 50 years, and enacts a tax on 20-year-olds in 2070 (so the second person pays for the stimulus from 2020). This second wealth transfer seems totally identical to the first once you account for interest/inflation/present value/etc. (Maybe I'm wrong, I very well might've missed something there.)
Does that work beyond the timescale of human lifespans? Can we spend money in 2021 and have our rich descendants pay it off in 3000? This seems wrong somehow; there is a fixed quantity of stuff in 2021 and we can't get more by taxing future people.
In your stimulus check scenario, the actual goods and services being purchased by the 20 year olds in 2020 are essentially being taken away from other, presumably older people in 2020. In essence, it is a transfer of resources from the old to the young, both in 2020. The financing mechanism doesn't change this fact, I don't think. In the first scenario, resources are being transferred from the young to the old, so these seem very different.
Thing both of us have missed so far is that we CAN borrow from the future by running a deficit-financed trade deficit now. This is a transfer of real resources from a foreign country to the U.S. in exchange for a reverse transfer at a later date. Implicitly, I think this is what is happening in the contemporary U.S.