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View Diary: Paul Krugman: "Cheating Our Children" (51 comments)

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  •  This paper is a good (3+ / 0-)
    Recommended by:
    jfromga, aliasalias, Calamity Jean

    starting point to find out why the debt/deficit hawks are full of it...

    The Case Against Inter-generational Accounting
     

    “Intergenerational accounting” purports to calculate the debt burden our
    generation will leave for future generations.

    The federal government spends by cutting checks—or, what is functionally the same thing, by directly crediting private bank accounts. This is
    a matter of typing numbers into a machine. That is all federal spending is.
    Unlike private firms, the federal government maintains no stock of cashon-hand and no credit balance at the bank. It doesn’t need to do so. There
    are surely limits of wisdom and prudence on federal spending, as well as
    numerous checks, balances, and self-imposed constraints, but there is no
    operational limit. The federal government can, and does, spend what it wants.

    Tax receipts debit bank accounts. So does borrowing from the public.
    These are operationally distinct from spending. There is no operational
    procedure through which federal government “uses” tax receipts or borrowings for its spending. If, perchance, one chooses to pay taxes in cash, the
    Treasury simply issues a receipt and shreds the cash. It has no need for the
    income in order to spend. This is why it is a mistake to look at federal tax
    receipts as an equivalent concept to income of households or firms.

    Loyalty to petrified opinion never yet broke a chain or freed a human soul in this world--and never will. Mark Twain

    by whoknu on Fri Mar 29, 2013 at 06:24:30 AM PDT

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