Public (National) Debt -- Who Needs It?

["John Gelles" <jjgelles@xxxxxxxx>]

            Is Sven Larson right that Keynesian theorists
            will regret the reduction in national debt in
            the US and Europe?

            Of course he links austerity (on the spending
            side) with reduced interest costs to taxpayers.

            Looked at from a different angle, would any
            of us regret direct monetization of the debt
            being slowly reduced today?

            I think not.

            Monetization at once,by paying off all gov't
            bonds in cash, risks inflation. But inflation can
            be prevented by means other than paying interest.

            As, for instance, by a huge consumption tax that
            would raise the price of "excess" consumption
            by orders of magnitude, not just percentages.
            Such an approach to inflation is very similar to
            price control.

            Price control can be good if it protects the
            minimum standard of living -- a standard that
            is rising, say, as output increases.

            It is time to "think outside the box": The present
            system has alienated voters and reduced our
            faith in democratic government. National debt
            has allowed austerity to be a "solution" when
            we know for the poor it is the"problem".

            If we monetize the debt at once, (or reduce it
            to zero over a decade or two), we may break the
            mental block that prevents voters from seeing
            the need for enforced full employment opportunity
            via government spending. (This would allow
            unemployment to be an option for the individual
            not the threat that enforces modern wage slavery.)

            If we can break the link between government
            spending and the tax against voters to pay interest,
            (much of it to the super-rich, like Ross Perot) --
            which we can do -- we will have no regret.

            If we follow Abba Lerner's advice (that
            the only reason for taxes, (i.e., to fight inflation),
            can be satisfied by more popular financial tools,
            (e.g., savings and/or production),  -- then our
            Keynesian theory can be proclaimed a success;
            and there will be no regrets for the loss of
            government bonds in private hands.

            All the moaning by PK scholars that we need
            risk free bonds and their interest to make
            democracy work is truly amazing.  If they
            are thinking of pensions for workers or social
            security, such risk free capital can be provided
            by SPECIAL non-marketable gov't bonds whose
            interest will be paid only to such beneficiaries.

            Let's get with it scholars. We want government
            to do a few things well:  Outlaw poverty of the
            kind that followed the great depression.  Outlaw
            pollution -- and make it more profitable to be
            green than the toxic.  Spread education and
            training for free over the net and its successor.
            Ensure comprehensive health care for all.  See
            to the national defense and a positive effort
            to prevent war where possible.

            Not included above is to borrow money from
            those who have it -- so those who don't will pay
            their richer cousins interest.


        John Gelles
         email    1944@xxxxxxxx
             url    http://1944.org