Max™ wrote:Deficit means the government spent more than it collected in taxes.
Surplus means it collected more in taxes than it spent.
If there is a surplus in the public sector, there is a deficit in the private sector, and vice versa.
What if GDP grows by 3%, and the government deficit amounts to 3% of GDP? Where is the surplus in the private sector? What does a deficit in the private sector mean?
The government debt itself can either wind up in the hands of citizens (of one nation or another) or other sectors of the government, if the government owes money, who does it owe it to?
Government debt is owned by whoever the owner is. Typically banks. Also citizens who get tax advantage from holding government debt.
Since government debt itself holds a stable value as treasury bonds, it is thus a useful method of investment and exchange.
Think about that. I've seen you show some smart thinking, this one isn't that hard. The government takes out loans and pays interest, and that's a useful thing for the people who want to lend money to the government and make a profit. Sure. Similarly, when the government gives money to poor people, that's useful to the poor people. But if the government were to stop making these useful handouts to rich people they could pull up their socks and learn to stand on their own feet, at least as much as the poor folk.
If there's a useful service here that government can provide to investors ad exchangers, they can pay for it. The government doesn't need to pay them to use the useful method the government provides them.
Assuming a hypothetical alternate universe created just now, just like this one, except the debt was set at 0, bonds would be worthless, the money supply would be unstable, and the economy would lack "lubrication".
You can say that for anything. If we had a hypothetical alternate universe just like this one except that our giant agribusiness corporations did not exist, we would have mass starvation. If we had an alternate universe just like this one except we had no insecticides to spray on our crops, we would have mass starvation. Just like this one except the USA had no military, we would have mass unemployment and a lot of our trade agreements would immediately collapse because foreign nations agreed to them only because of our military. So what?
If you pushed it to have a government surplus, that means WE as citizens of that nation are now paying the government to exist, with no benefit whatsoever for it.
Yes, it would be stupid for the government to collect more taxes than it spent, except to deflate the money supply. Kind of a way to tell the US public "You guys have been working too hard, let's all take it easy and spend more time enjoying ourselves".
Good debt: bonds for investment, financial stabilization, long term infrastructure investment, social benefits programs, education investment, things which work to guarantee a stable and productive future for us and our children.
Bad debt: servicing debt interest with debt (or servicing debt interest on debt which exists due to servicing interest, etc), military spending beyond what is actually needed to provide a stable and secure trade economy, tax cuts with no direct benefit (in general if a tax cut pushes the overall tax rate towards flat or even regressive curves, it's no benefit), pork projects, financing bailouts without changing anything about what caused the crisis, and so on.
I agree that most of the things you say are good debt look to me like good spending, and your bad debt is bad spending. There's the question of how much good spending we can afford to do. We want to invest in the future, and also we want to consume stuff now. If we sacrifice too much now, that isn't good even while too little investment is bad. I'm not clear how we should make that decision as a society. Individual investors can decide how much they want to invest versus consume, but there's no particular reason to think the sum of all those choices will be a good choice for the society. On the other hand there's no particular reason to think politicians would make good choices either. It's a puzzle.
Then there's the question how to pay for good spending. Collecting it as taxes has the disadvantage that the people who pay the taxes get upset about it. Spending the amount of money needed to expand the money supply enough, without going into debt or collecting taxes, is good. But it only pays a few percent of GDP a year. Maybe more if the economy gets good again like it was in the early 60's. We can borrow or inflate to spend more for good stuff, but that's always a gamble.
Good deficit: financing emergency responses (not that there is a direct return, but if the government can't be forgiven for spending money to directly save lives, what the fuck is it there for?), financing high return projects, funding scientific and technological research and development, funding education, funding preventative healthcare (rather than letting conditions which are easily preventable go unnoticed and untreated, saving a huge amount of money which is currrently wasted), insert your own examples of government spending which leads to a net gain compared to private spending.
Sure. And when it's politicians deciding, that's maybe less reliable than businessmen who perhaps might see ways to skim money by making bad choices. I don't see a good way to choose, except I personally am willing to selflessly research good choices.
Bad deficit: financing debt interest, financing projects with a lower rate of return than private spending, financing projects with a negative gain (blowing up brown people, for example), financing tax cuts only to win votes despite the actual negative outcomes, ridiculous plans to "pay down the debt", and so forth.
Agreed. But it's hard to be sure ahead of time. Wolfowitz projected we would make an easy profit on the Iraq war. And people say the intervention in Libya was quite cheap and had a wonderful result. It's hard to predict the rate of return of public spending. If there was an easy way to collect the profits, it might be plausible as a private venture. If you reduce disease rates, you can only guess what the rates would have been otherwise and what it would have cost.
The Law of Fives is true. I see it everywhere I look for it.