3 ms·

present consumption must come out of present production yes, that's the starting point of my argument, thank you for phrasing it clearly. The next step is that

by DenisM 17y ago

present consumption must come out of present production yes, that's the starting point of my argument, thank you for phrasing it clearly. The next step is that future demand for durable goods is not a good savings mechanism for a number of reasons: 1. The demand isn't large enough for a whole generation of people 2. Those goods have to be stored and maintained, which is costly and eats into the savings 3. It may unpredictably lose value due to technological innovation, and if you made a poor bet you will starve when that happens Therefore the premise of my argument is that the idea of long-term savings is fictitious. Absent that there are only so many way to defuse the demographic bomb: 1. Saddle the young with debt by enticing them to spend beyond their means. Later they are compelled to pay via social norms and coercion of the state. 2. Collude on ownership of a crucial scarce resource such as land or oxygen. Collusion is likely to kill the economy very quickly though. 3. Make more babies. Costly in the short term, especially given that anyone who is making babies is also under the opression of debt, and the more babies the more crushing that debt is.

hga 17y ago
You're welcome; it's not my phrase, just something I picked up in discussions of this issue. Although I should also mention "The Last Fool" concept. Those long-term savings won't be fictitious if you aren't the last fool left with them, i.e. you find another "fool" to sell them too. But as you note that's a very iffy thing, certainly not something you should bank on, so to speak. (Hmmm, you left out the Soilent Green option ... it's already being discussed by "serious thinkers". And there are less unpleasant ways to abrogate explicit and implicit promises to older generations.)
- DenisM 17y ago
  Suppose I am in my prime years. Should I help design the social system that opresses the young or the old? I will never be young again... and so the Soylent Green option is not workable! The young are pretty much doomed, the only question is as to the exact mechanism of oppression. Alternative to debt burden would be oppressive taxes, but this has bad side-effects as well: 1. Taxes are not as discriminating against the young as situation dictates (debt is very discriminative) 2. People actually feel angry when money is taken from them via taxes. They are a lot less angry when they willfully spend themselves into debt. They even feel guilty when they can't pay. Bottom line is that it's easier to enforce because voluntary compliance is so much higher and political resistance to "pay your debt" is harder to imagine than to "pay high taxes". 3. Taxes depress economic development, while debt increases it (at the expense of the boom-bust volatility). So I don't really see any realistic alternatives to the debt burden. There is a very remote hope that technology brings us basic necessities too cheap to meter so that we don't have save for retirement. But that's really out there.
  - hga 17y ago
    No argument with the above, except ... if you aren't paying into the fisc, you just might find that your posture is not so great. In Jerry Pournelle's CoDominion future history "Taxpayers" were in a class way above those who lived in "welfare islands". I wouldn't assume our current political order survives this looming mess (heck, many including me argue it didn't survive the Civil War or FDR).
brc 17y ago
3. Make more babies. This is what the Australian government decided to do. $4000 per child, no questions asked. (subsequent governments have fiddled with this and pandered to their support base, but the concept still remains) The treasurer came out with a phrase 'one for mum, one for dad, one for the country'. It worked. Birth rates are now higher than they have ever been. I'm normally against this type of government wastage. But it's not hard to see that the $4000 will be earnt back within a ~25 year period once the child becomes an adult and starts paying taxes, even when you take inflation and future value of the $4000 into account. The $4000 was being paid out of revenue at the time as the government had no debt. (subsequent governments have started to borrow again, being unable to be fiscally responsible more than a couple of years) It's actually the smartest strategy of your three, because the old people need to have as many young taxpayers working as possible.
- hga 17y ago
  Is it "wastage"? In the 50's, the marginal top income US tax rate was 90%, but the exemptions for dependents were very substantial. However they weren't indexed for inflation so they became relatively trivial over time before Reagan got the Congress to index them. Perhaps a return to that tax policy is worth a try?

by DenisM 17y ago

hga 17y ago

You're welcome; it's not my phrase, just something I picked up in discussions of this issue. Although I should also mention "The Last Fool" concept. Those long-term savings won't be fictitious if you aren't the last fool left with them, i.e. you find another "fool" to sell them too. But as you note that's a very iffy thing, certainly not something you should bank on, so to speak. (Hmmm, you left out the Soilent Green option ... it's already being discussed by "serious thinkers". And there are less unpleasant ways to abrogate explicit and implicit promises to older generations.)

DenisM 17y ago
Suppose I am in my prime years. Should I help design the social system that opresses the young or the old? I will never be young again... and so the Soylent Green option is not workable! The young are pretty much doomed, the only question is as to the exact mechanism of oppression. Alternative to debt burden would be oppressive taxes, but this has bad side-effects as well: 1. Taxes are not as discriminating against the young as situation dictates (debt is very discriminative) 2. People actually feel angry when money is taken from them via taxes. They are a lot less angry when they willfully spend themselves into debt. They even feel guilty when they can't pay. Bottom line is that it's easier to enforce because voluntary compliance is so much higher and political resistance to "pay your debt" is harder to imagine than to "pay high taxes". 3. Taxes depress economic development, while debt increases it (at the expense of the boom-bust volatility). So I don't really see any realistic alternatives to the debt burden. There is a very remote hope that technology brings us basic necessities too cheap to meter so that we don't have save for retirement. But that's really out there.
- hga 17y ago
  No argument with the above, except ... if you aren't paying into the fisc, you just might find that your posture is not so great. In Jerry Pournelle's CoDominion future history "Taxpayers" were in a class way above those who lived in "welfare islands". I wouldn't assume our current political order survives this looming mess (heck, many including me argue it didn't survive the Civil War or FDR).

brc 17y ago

3. Make more babies. This is what the Australian government decided to do. $4000 per child, no questions asked. (subsequent governments have fiddled with this and pandered to their support base, but the concept still remains) The treasurer came out with a phrase 'one for mum, one for dad, one for the country'. It worked. Birth rates are now higher than they have ever been. I'm normally against this type of government wastage. But it's not hard to see that the $4000 will be earnt back within a ~25 year period once the child becomes an adult and starts paying taxes, even when you take inflation and future value of the $4000 into account. The $4000 was being paid out of revenue at the time as the government had no debt. (subsequent governments have started to borrow again, being unable to be fiscally responsible more than a couple of years) It's actually the smartest strategy of your three, because the old people need to have as many young taxpayers working as possible.

hga 17y ago
Is it "wastage"? In the 50's, the marginal top income US tax rate was 90%, but the exemptions for dependents were very substantial. However they weren't indexed for inflation so they became relatively trivial over time before Reagan got the Congress to index them. Perhaps a return to that tax policy is worth a try?