pk fantasy:
"..everyone receives a large allotment of newly printed government bonds, adding up to 500 percent of GDP."
distributed per capita ??
"The government is now deeply in debt — but the nation has not directly gotten any poorer "
" the public, in its role as taxpayers, now owes 500 percent of GDP, but the public, in its role as investors, now owns new assets equal to 500 percent of GDP."
new and safe assets versus new taxes
"It’s a wash."
no ...what's the household by household distribution of new tax burden versus new bond holdings ??
"the extra revenue is matched by the extra income people receive as bondholders."
but not at the household level there are many winners and losers
in consumption
in production ??
well what tax
and here's pk's half baked point:
" tax rates will have to go way up; and because lump-sum taxes don’t exist in the real world, this means that marginal tax rates will have to go way up."
marginal rates go up ?? why ??
why not a value added tax ?? a flat tax on consumption
pattern of pay in per household versus pattern of pay out
"you don’t have to be a right-winger to acknowledge that yes, very high marginal tax rates act as a disincentive to productive activity."
wh not clear this up
by saying after the bond hand outs
now
assume a new tax structure to pay for this huge issue
with maximal disincentives to produce
sum sort of diamond mirlees anti ramsey tax
". real GDP may well fall significantly."
err by assumption
" the burden of debt is about incentives"
ya ya ya sure sure but that goes both ways bub
but earlier he made a more complete generality
debt burden there is described as about
"problems of distribution and incentives"
so paul where's the distribution bit ??
leave it out and you play into the trickle downer's game plan
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imagine now a borrowing that is paid out to high marginal spender households
in a time of slack in the production platform
and assume the debt created is attached to a dedicated tax base put together
by various criteria
including interets only pay back and roll over of the debt total itself
"Private debt creates a different kind of problem it increases our macroeconomic vulnerability."
yikes what are we assuming here that is not necessary ??
but then he ends with a " general point"
" the analogy with a family that owes too much is all wrong."
indeed
but pk manages to craft a "thought experiment "
that produces a boringly conventional cautionary tale
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ricardian equivalence is one of the most contrived parables imaginable
