RE: Debt reduction also creates fiscal space

[Clifford Poirot <cpoirot@xxxxxxxxxxx>]

Henry, you make some interesting points below. I'll concede a few specifics.
The point I am trying to get at, and I hope I clarified this further in my
reply to Janet, is that a deficit and consequent debt, whether at the
household level, or the public level, that is focused on immediate
consumption rather than on overall investment, requires somebody to pay it
back down the road. Worse yet, it gets paid back without the benefit of
higher earnings. So yes, if I take a business client to dinner, that is
possibly an intelligent expenditure for my credit card.

Notably, paying high levels of debt service reduces the amount of money
available for social expenditures-as does a permanently high level of
military spending. It is the budget priorities we should be focused
on-IMHO-not at present, the current overall level of spending. There is also
the added constraint that presently, there is no political support for
expanding spending.

> -----Original Message-----
> From:	ÁÎ×Ó¹â HenryC.K.Liu  ¹ù¤l¥ú [SMTP:hliu@xxxxxxxxxxxxxx]
> Sent:	Friday, February 11, 2000 9:47 PM
> To:	POST-KEYNESIAN THOUGHT
> Subject:	Re: Debt reduction also creates fiscal space
>
>
>
> Clifford Poirot wrote:
>
> > Here is a rough analogy. If I borrow to buy a house, that is
> constructive
> > borrowing.
>
> Not if the house is bigger than you need.
>
> > If I run up my credit card eating at the most expensive
> > restaurants, my future consumption will be harmed.
>
> Not if you do business entertaining.
>
> > In the 1980's, we ran up the nation's credit card.
>
> The question is not the debt, its is how the debt was used, as you
> suggest.
>
> > Now, in the 90's and 00's we pay for this in the
> > current tight fiscal policy. We are made better off by the current tight
> > fiscal policy because we are accumulating space to use intelligent
> leaning
> > against the wind policy in the next recession, while eliminating debt.
> >
>
> But the CEA said there isn't going to be a next recession, while recent
> fical
> tightness had exacerbated social polarization.  Would America be better
> off by
> not running a surplus and increase government spending on health,
> education,
> etc. or to bring unemployment from the so-called structural bottom of 4%
> to
> zero?
>
> In reality, doesn't debt reduction destroys fiscal space?
>
> Henry C.K. Liu