Quote:
Originally Posted by Morphismus
For as long as I follow politics here in Germany, I hear that we have to lower the national debt in order not to leave too much of a burden to the next generation. As I understand it, this is also an issue brought up repeatedly in American politics as well, and surely in a lot of other countries.
However, when the next generation pays back national debt, say in 50 years - aren't they paying back to people who are also of the next generation? So isn't national debt a zero-sum game generational-wise by definition?
Thoughts?
the absolute nominal debt is almost certainly never going to be repaid ever. it's only a very infrequent event that countries run a surplus to begin with, and when it happens it's a small one, while deficits are often very high.
what can happen is to keep the proportion of debt to GDP stable or decrease it.
what's going to be paid is usually interests though.
if all the Debt is held domestically it's just about a 0 sum game among citizens. the next generation will have taxpayers paying interests to resident owners of the debt (it is often the very same people as the bulk of taxation is paid by the rich, and the rich own most government bonds).
inside rich people not everyone pays the same taxes nor owns the same assets so basically it's a 0 sum game among rich residents.
at the same time everyone else is getting less in government goods and services that they could get with the same amount of overall tax revenue available (bit that wasn't theirs to begin with).
that's more or less the spot Japan is right now, with interests still being very low, all debt owned domestically, not a big fuss.
but when owners are foreigners, you are bleeding resources getting nothing back.
somebody today gets healthcare and pension paid and someone else a generation from now will have to work to pay foreigners interest because of that.
that's why Italy and others are doing everything they can more to get domestic residents buy the debt than to reduce it's levels. the former is more important, if the money stay in the country the country isn't poorer. it's ik some way like if you owe a lot of money to your sister, you might be poorer, your family isn't in any rational sense.