Wednesday , August 12 2020
Home / Don Boudreaux /Bonus Quotation of the Day…

Bonus Quotation of the Day…

Summary:
… is from page 200 of the late Alberto Alesina’s important 2019 book – co-authored with Carlo Favero and Francesco Giavazzi – Austerity: Another line of argument against austerity is that public debt is not really a problem. This argument is especially popular now, given that interest rates are generally very low, so debt is not expensive. We think that this view is problematic for at least three reasons. First, large public debts imply a redistribution between current generations and future ones who cannot vote. This is simply unfair and needs to be taken into consideration by those who seem to advocate more and more debt. If one considers not only measured public debt but also the state of many pension systems, the picture becomes even more troublesome. Second, interest rates will

Topics:
Don Boudreaux considers the following as important: , ,

This could be interesting, too:

Don Boudreaux writes Some Links

Don Boudreaux writes Bonus Quotation of the Day…

Don Boudreaux writes You Did PAY for That!

Don Boudreaux writes People Believe the Damndest Things

… is from page 200 of the late Alberto Alesina’s important 2019 book – co-authored with Carlo Favero and Francesco Giavazzi – Austerity:

Bonus Quotation of the Day…Another line of argument against austerity is that public debt is not really a problem. This argument is especially popular now, given that interest rates are generally very low, so debt is not expensive. We think that this view is problematic for at least three reasons. First, large public debts imply a redistribution between current generations and future ones who cannot vote. This is simply unfair and needs to be taken into consideration by those who seem to advocate more and more debt. If one considers not only measured public debt but also the state of many pension systems, the picture becomes even more troublesome. Second, interest rates will not be low forever. Sooner or later they will return to more “normal” levels. With higher interest rates, more and more taxes will be needed to service the debt, reducing growth and generating a potential vicious cycle: high taxes, low growth, debt over GDP ratio not decreasing, and so forth. Third, in some countries high debt levels may generate default risk, high interest rates, capital outflows (as in Greece), and a debt crisis that may impose austerity when it is particularly costly.

Comments

Don Boudreaux
He is a professor of economics at George Mason University in Fairfax, Virginia. Previously, he was president of the Foundation for Economic Education.

Leave a Reply

Your email address will not be published. Required fields are marked *