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Bruce, Good analysis. Shows an understanding of economics. However,
your 3rd reason is not quite correct. Rich people may have more debt
than the less well off, but proportionally have much less debt. When a
middle income family carries a mortgage, that is often a large and
burdensome amount relative to income. The rich seldom feel the same
pinch with their mortagages, unless, of course, they got themselves into
a "house poor" situation, which is much more under their control. Now if
that means the less well off benefit more from cutting the deficit than
the rich--well, why not?
Dick
On Fri, 23 Jul 1999 11:03:27 -0400 "BruceB" <bruceb@xxxxxxxxxxxxx>
writes:
>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?
>>
>
>
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