Public debt
Intergenerational effects
It often claimed that the national debt places a burden upon future generations. William Baumol and Alan Blinder have pointed out that such claims are often based upon fallacious reasoning, and that, since it is impossible for repayments to be made to anyone not alive at the time, the repayment is necessarily a transfer of resources within the existing population [1]. It is nevertheless true that debt repayments normally involve an intergenerational transfer within the existing population because they are partly paid for by taxes paid by a new generation of people who tend not to be holders of government bonds. Also - to the extent that government bonds are subsequently passed by inheritance to a succeeding generation - similar transfers can be expected to affect future generations [2]. Concern about that issue has led to the adaptation of "overlapping generation models" to its analysis[3], and the development of techniques of "generational accounting"[4][5]. However, generational accounts require both economic forecasts and assumptions about future policy, and are consequently controversial and subject to wide margins of uncertainty.
- ↑ William Baumol and Alan Blinder: "Bogus Arguments about the Burden of National Debt". on pp309-311 of Economics, Principles and Policy, Harcourt, Brace Jovanovich 1979
- ↑ And, if the bonds were held by foreigners, repayment would, of course involve transfers to them.
- ↑ [8AMB02261313A040.http://www.cepr.org/pubs/bulletin/dps/dp496.htm Public Debt Management: A Growing Burden?, Centre for Economic Policy Research 1990]
- ↑ John Ablett Generation Accounting, Agenda vol.3 no.4 1996
- ↑ Who Pays What and When? An Assessment of Generational Accounting, Congressional Budget Office. November 1995