Yes, they are all facts. No, they are not unrelated.
This is unrelated.
I would like you, if possible, to explain what this means -
Repaying debt is not “instead of” government spending. The government borrowed the money and spent it. When they repay the debt, the taxpayer has to come up with the money to repay. As I mentioned, this is a transfer of money from future taxpayers to current beneficiaries.
If the idea is just that the people who are being repaid will spend the money instead of the government, that does not account for the fact that the government already spent the money. That’s why they have to take the money from the taxpayer.
You can’t give back money you already spent.
Is that what you meant? if so, it is pretty obviously wrong.
Do you think that if SS bought $X billion of bonds from Japan instead of the US that the government wouldn’t issue $X billion of new bonds to make up for the shortfall? If not, these things are unrelated.
If you find economics confusing, the best way to proceed is to forget everything you think you know about “money” and focus on the real economy. Confusion about “money” leads to nonsense. Upthread someone asked whether money was “fiction.” In the quote you speak of transferring money from future to present. :smack: See if you can phrase your question in terms of the real economy without mentioning “money.”
In the real economy, some people produce goods and services; some people consume goods and services. As the ratio of retirees and unemployed to workers increases, there will be transfers from workers to retirees. Forget past and future. In 2019 workers will produce goods and services; and retirees, in 2019, will consume some of those goods and services. The way this is accounted (whether exchanging pieces of paper, or moving bits in a computer) is secondary. (It happens that workers consume less because they are taxed in money; and retirees are paid in money. So what? Focus on the real economy.)
It is the demographic problem that is talked about regarding SocSec. Think about this; focus on the real economy; then rephrase your question in a way that makes more sense.
There’s also the matter that the time value of money isn’t the same for everyone. Heck, the value of anything isn’t the same for everyone: That’s the whole basis for all of economics, in a nutshell. If someone is buying a $100 bond that will mature at $120 in five years, then that someone must think that $120 five years from now is worth more than $100 now. If the government is selling that same bond, then they must think that $100 now is worth more than $120 in five years. Which one is right? Quite possibly, both. The buyer might have enough cash for right now from continuing income, but wants to prepare for retirement in the future, which makes future money worth more, relatively speaking. The government might have an economically-stimulative bridge they want built, and want the benefits of it as soon as possible, which makes present money worth more, relatively speaking. The two parties have different goals and different values, and so they can both profit from the same deal.
Your insults are hilarious but I’ll try to answer your questions as though you were a sincere learner.
“The relationship between government spending and total spending is indirect.”
The real economy is the total of goods and services. When the government taxes, or borrows from, its citizens, that leads to more spending by the government and less by the citizens who were taxed. Ignoring “second-order effects” the total spending doesn’t change, just the share of the government. Is this confusing?
“When, in future, the government is repaying its debt that just means that instead of spending by government there will be spending by whoever’s bonds were redeemed.”
Similarly, when the government repays its debts, it foregoes spending – those who receive money from the bond redemptions will “take up the slack.”
(There are second-order effects, but let’s learn to crawl before we try to walk.)
I’m at a loss to guess why you find this confusing. Do you have a real question?
If they invested the money in Japanese bonds, when they bonds came due the Japanese government would have to find some way to raise the money to pay Social Security the money that was borrowed plus interest. They could do this by cutting government spending or raising taxes.
This is exactly the same scenario since they bought US bonds. When the bonds come due the US government has to pay the money back by either cutting spending or raising taxes.
Now pretend the social security trust fund had never existed and the surpluses are now over and the program is in the deficit. What is the solution?, either the government needs to cut spending or raise taxes to make up for the deficit. The existence of the social security trust fund has no practical effects.
The government issues the same amount of bonds in both cases. That is why it is irrelevant. You are mixing up SS with the “evil” of debt, and I think septimus has covered that pretty well.
Now, it is true that the benefit we get from the borrowing is crucial, whether government or private. But what we borrow for is a different issue than whether borrowing is good in general.
What do you mean by deficit? If you mean outlays are greater than income, they cash bonds and don’t buy as many, and the bigger government sells bonds to someone else to make it up. Government bond sales are the same in both cases.
If you mean SS has run out of bonds that is a problem, but it is a problem of planning and has nothing to do with the issue at hand.
I’m retiring soon. My savings will diminish over the next 30 years. As long as it stays positive and I have enough to live on over my annuity and SS, I’m fine. The savings exist to be drawn down. If I’m out of savings and have to cut my lifestyle, I either didn’t save enough or am spending too much. But that has nothing to do with the benefit of drawing down my savings. If I die with a pot of money I probably saved too much or spent too little.
As I said, repaying the debt does not mean that spending by the debt holders replaces spending by the government, because it forgets that debt repayment involves taking taxes away from one group and repaying the debt with that.
If the government is issuing bonds to repay a debt, that is simply transferring debt from one place to another, not repaying it.
Let’s leave the Social Security hijack to one side.
Well, you were the first to mention Social Security
Not that I’ve ever heard someone say that.
What ever. The point is that if revenue from the bonds is put back into the economy, and causes the economy to grow faster than it otherwise would have, this improved economy would generate more than enough extra revenue to pay off the bond.
No one is disputing that not all expenditures are useful ones. ahem Iraq War ahem. But a person whose income has grown thanks to government expenditures who complains about spending some of that gain in higher taxes is a jerk.
I thought that was due to the gold standard, and the money supply not keeping up with a growing economy.
Look, I’m on your side, sort of. There are times when deficit spending is reasonable. We are currently in one of them. But I’m not convinced that we need deficit spending as a baseline even in the good times and quiet years.
Please see my link above. We’ve been in debt (not always annual deficits, but indebtedness) since something like 1835. We came out pretty well overall.
Taking on some debt in times of recession or emergency, and paying down that debt during the good times, seems alright to me. Definitely better than running massive debts all the time. I know of plenty of nations that were ruined by too much debt: Argentina, Greece, Germany in the 20’s. I never heard of a nation being ruined by too little debt.
Very good. That’s exactly what Keynes proposed. Germany’s debt was imposed from the outside and didn’t do them any good at all, and so isn’t a good example.