Yes I’m being saucy, but Daniel in the comments just wrote this: “I am more curious right now how to take Grant’s point that what changes things is the taxes, not the debt. It only hurts future generations when you change the financing scheme.”
Everyone, let’s take a deep breath. Of course that’s what makes future generations poorer. Go read the words I put in Landsburg’s mouth in “The Economist Zone.” I had him make this point beatifully and with pizzazz, in a way that started David Brooks on the path to you-know-what.
Then, recall this adapted Excel table I posted for all of you back on January 9, 2012, along with my commentary on it:
Everyone see how this one plays out? In period 1, Old Al clearly benefits. He gets a government transfer of 50 apples, paid for by a government budget deficit (there is no taxation in period 1).
Also note that I’ve put in the PDV of the tax receipts at each period. See how they sum up to 50 by the end? So one way to understand what is happening, is that the government gives Old Al a payment of 50 apples in period 1, and then spreads the tax burden to pay for it over everybody else (at some point in their lives) in periods 2 through 9. The government uses the bond market to pull all of that revenue forward in time, and give it as a spot payment to Al in period 1.
Now the crucial thing about this particular example I’ve constructed, is that Old Al is the only person who benefits from it, while every other single human being in the country, forever and ever and ever loses in this scenario. And yet, it is still the case that if we take any future time period, the “income earned by our descendants in period x is still 200 apples total.”
And in light of the above diagram, I would like Daniel to reconcile it with his frequently stated position: “If you look at individuals in the future, obviously some of them win and some of them lose – but that’s what Krugman said, from the very beginning, was “a different kettle of fish”.”
Notice that Young Daniel Kuehn was annoying Young Bob Murphy even back then…