Saturday, October 27, 2012

Don Boudreaux on the Keynesian Myth of Debt Totalitarianism

Cafe Hayek's Don Boudreaux echoes James Buchanan and makes an excellent point about the Keynesian myth of debt totalitarianism:
If we regard all humanity as One, then U.S. government debt held by people in China and Finland is debt that, no less than is such debt held by people in California and Florida, debt that “we owe to ourselves.” ... 
It won’t do here, by the way, to object to the previous paragraph by pointing out that Chinese citizens (unlike American citizens) aren’t on the hook to pay the taxes necessary to pay interest or principal on U.S.-government debt.  A central point of Jim Buchanan’s debt-burden case is that even within national boundaries, the individuals whose taxes are raised today to pay interest or principal on a government bond are distinct from the bond holders who receive those payments.  The payer is not the payee, and that the latter might share national citizenship with the former is an economically irrelevant happenstance that cannot possibly make a government-debt burden disappear.

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