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The Federal government pays interest on T-bills with tax revenue. I don't understand why people give me resistance on this. The higher the debt is, the higher t

by AlanSE 6y ago

The Federal government pays interest on T-bills with tax revenue. I don't understand why people give me resistance on this. The higher the debt is, the higher the interest payments are. Taken to its logical extreme, why bother collecting taxes at all? Just pay for all government spending with this magic money machine.

dragonwriter 6y ago
> The Federal government pays interest on T-bills with tax revenue. Generally, no, it pays the interest on T-Bills (or any other marginal increase in spending) with additional borrowing. > I don't understand why people give me resistance on this. Because it's mostly false. > The higher the debt is, the higher the interest payments are. Ceteris paribus, yes, but that doesn't support your other claim. > Taken to its logical extreme, why bother collecting taxes at all? MMT adherents will tell you “for the monetary impacts of withdrawing the amount of funds, and the distribution of funds, collected by the taxes from circulation”.
- AlanSE 6y ago
  You comments have prompted me to start reading the book The Deficit Myth. I am looking into this because people I respect are saying things that surprise me. I abjectly disagree with your sentiments and the core points of the book, so far. I'm looking to see if this book will change my mind. It's hard to even pin down what MMT is saying. What I'm saying is that our national debt is productivity borrowed from our future, from our children, used for today. This translates into real investment, because I fully expect that our debt crowds out physical investment, like renewable energy or nuclear power plants in favor of plants with lower capital but higher operating costs. It's entirely possible to borrow from our children in terms of physical allocation of assets. While the debt is just some numbers in computers, it changes the way we allocate real productive resources. I fully agree that we can, and should, step on the inflation pedal more. If our deficit were fully paid for by printing money, then I would not have a problem with it. I would hardly even consider it a deficit. This is miles away from reality. Issuing T-bills is not the same as issuing cash, and this book I'm reading (and commentators like you) are reckless with the distinction. I also agree with the book's claim that we should increase taxes. This appears to be the opposite of what the MMT headline argument is, which is that deficits don't matter.

by AlanSE 6y ago

dragonwriter 6y ago

> The Federal government pays interest on T-bills with tax revenue. Generally, no, it pays the interest on T-Bills (or any other marginal increase in spending) with additional borrowing. > I don't understand why people give me resistance on this. Because it's mostly false. > The higher the debt is, the higher the interest payments are. Ceteris paribus, yes, but that doesn't support your other claim. > Taken to its logical extreme, why bother collecting taxes at all? MMT adherents will tell you “for the monetary impacts of withdrawing the amount of funds, and the distribution of funds, collected by the taxes from circulation”.

AlanSE 6y ago
You comments have prompted me to start reading the book The Deficit Myth. I am looking into this because people I respect are saying things that surprise me. I abjectly disagree with your sentiments and the core points of the book, so far. I'm looking to see if this book will change my mind. It's hard to even pin down what MMT is saying. What I'm saying is that our national debt is productivity borrowed from our future, from our children, used for today. This translates into real investment, because I fully expect that our debt crowds out physical investment, like renewable energy or nuclear power plants in favor of plants with lower capital but higher operating costs. It's entirely possible to borrow from our children in terms of physical allocation of assets. While the debt is just some numbers in computers, it changes the way we allocate real productive resources. I fully agree that we can, and should, step on the inflation pedal more. If our deficit were fully paid for by printing money, then I would not have a problem with it. I would hardly even consider it a deficit. This is miles away from reality. Issuing T-bills is not the same as issuing cash, and this book I'm reading (and commentators like you) are reckless with the distinction. I also agree with the book's claim that we should increase taxes. This appears to be the opposite of what the MMT headline argument is, which is that deficits don't matter.