|
PureBytes Links
Trading Reference Links
|
Howard, the biggest issue here is what is the best thing to do with the
surplus, and when you look at all the options, I think paying off the
national debt wins hands down for three reasons.
First, the goal of any tax cut is to increase the disposable income of the
tax payers. When you pay off debt, you lower interest rates. Lower
interest rates in turn result in lower auto and housing payments for tax
payers, which increases their disposable income. I know this sounds simple,
but even the WSJ (whose been ranting against paying down the debt) doesn't
seem to understand.
Second, although Japan has clearly proved a country can save too much money,
it's safe to say that the US is nowhere near the danger point. The best
thing that could happen with any money returned to tax payers would be for
them to save it, because the economy is clearly not lacking in demand right
now. Paying off the debt actually has a better chance of accomplishing
this. Why? Because the debt is in the form of long term bonds. How many
bondholders do you know take the proceeds from a called-in bond and go out
and spend the money? Not too many, I bet. Rather, they take the proceeds
and turn right around and put it into other investments (usually other
bonds). On the other hand, there are plenty of people who take additional
tax refunds and immediately increase their levels of spending. This is not
a perfect science, but the historical evidence does show that money put back
into the economy through debt retirement, as opposed to tax reductions, has
a greater likelihood of being saved.
The third reason is the all important political factor. Every time
Republicans try to reduce tax rates they get beaten up for favoring the
rich. The funny thing is, debt retirement will disproportionally help the
rich just as much as a tax reduction would (richer people have bigger auto
loans and mortgages, obviously). Despite this, liberals seem to be very
supportive of the idea of paying off the debt, so why pick a fight when you
don't have to?
Bruce
----- Original Message -----
From: Howard Hopkins <hehohop@xxxxxxxxxxx>
To: <andrew@xxxxxxxxxxxxx>; <dickwebb711@xxxxxxxxx>;
<realtraders@xxxxxxxxxxxx>
Sent: Friday, July 23, 1999 9:26 AM
Subject: Re: GEN: Y2K EXTREMISM?
> Didn't we hear this same debt arguement in the 92 elections??
>
> The absolute $ amount of national debt is irrelevant. The % debt relative
> to GDP is what you need to control. Should you refinance your home
mortgage
> when interest rates are @ 30 year lows?? How about a second mortgage?
>
> Supply side economics kicked off this whole boom in the Reagan era and
> expanded the revenue side of the equation. Why won't that work now?
>
> And by the way... aren't stock prices near all time highs, bond prices
near
> multi-decade lows, and the dollar the strongest currency in the world?
This
> economic theory to pay down debt to improve the US economy has been
> invalidated in the real world... don't you agree?
>
|