Alex Wong/Getty Images

The Scarecrow of National Debt

Many people think that, however burdensome heavy taxes are, it is more honest for governments to raise them to pay for their spending than it is to incur debt. But public debt in the US and the UK is far below the level at which it would crowd out private spending today or depress future generations' consumption.

CAMBRIDGE – Most people are more worried by government debt than about taxation. “But it’s trillions” a friend of mine recently expostulated about the United Kingdom’s national debt. He exaggerated a bit: it is £1.7 trillion ($2.2 trillion). But one website features a clock showing the debt growing at a rate of £5,170 per second. Although the tax take is far less, the UK government still collected a hefty £750 billion in taxes in the last fiscal year. The tax base grows by the second, too, but no clock shows that.

Many people think that, however depressing heavy taxes are, it is more honest for governments to raise them to pay for their spending than it is to incur debt. Borrowing strikes them as a way of taxing by stealth. “How are they going to pay it back?” my friend asked. “Think of the burden on our children and grandchildren.”

I should say that my friend is extremely old. Horror of debt is particularly marked in the elderly, perhaps out of an ancient feeling that one should not meet one’s maker with a negative balance sheet. I should also add that my friend is extremely well educated, and had, in fact, played a prominent role in public life. But public finance is a mystery to him: he just had the gut feeling that a national debt in the trillions and growing by £5,170 a second was a very bad thing.

To continue reading, please log in or enter your email address.

Registration is quick and easy and requires only your email address. If you already have an account with us, please log in. Or subscribe now for unlimited access.

required

Log in

http://prosyn.org/1SPoQRJ;
  1. Chris J Ratcliffe/Getty Images

    The Brexit Surrender

    European Union leaders meeting in Brussels have given the go-ahead to talks with Britain on post-Brexit trade relations. But, as European Council President Donald Tusk has said, the most difficult challenge – forging a workable deal that secures broad political support on both sides – still lies ahead.

  2. The Great US Tax Debate

    ROBERT J. BARRO vs. JASON FURMAN & LAWRENCE H. SUMMERS on the impact of the GOP tax  overhaul.


    • Congressional Republicans are finalizing a tax-reform package that will reshape the business environment by lowering the corporate-tax rate and overhauling deductions. 

    • But will the plan's far-reaching changes provide the boost to investment and growth that its backers promise?


    ROBERT J. BARRO | How US Corporate Tax Reform Will Boost Growth

    JASON FURMAN & LAWRENCE H. SUMMERS | Robert Barro's Tax Reform Advocacy: A Response

  3. Murdoch's Last Stand?

    Rupert Murdoch’s sale of 21st Century Fox’s entertainment assets to Disney for $66 billion may mark the end of the media mogul’s career, which will long be remembered for its corrosive effect on democratic discourse on both sides of the Atlantic. 

    From enabling the rise of Donald Trump to hacking the telephone of a murdered British schoolgirl, Murdoch’s media empire has staked its success on stoking populist rage.

  4. Bank of England Leon Neal/Getty Images

    The Dangerous Delusion of Price Stability

    Since the hyperinflation of the 1970s, which central banks were right to combat by whatever means necessary, maintaining positive but low inflation has become a monetary-policy obsession. But, because the world economy has changed dramatically since then, central bankers have started to miss the monetary-policy forest for the trees.

  5. Harvard’s Jeffrey Frankel Measures the GOP’s Tax Plan

    Jeffrey Frankel, a professor at Harvard University’s Kennedy School of Government and a former member of President Bill Clinton’s Council of Economic Advisers, outlines the five criteria he uses to judge the efficacy of tax reform efforts. And in his view, the US Republicans’ most recent offering fails miserably.

  6. A box containing viles of human embryonic Stem Cell cultures Sandy Huffaker/Getty Images

    The Holy Grail of Genetic Engineering

    CRISPR-Cas – a gene-editing technique that is far more precise and efficient than any that has come before it – is poised to change the world. But ensuring that those changes are positive – helping to fight tumors and mosquito-borne illnesses, for example – will require scientists to apply the utmost caution.

  7. The Year Ahead 2018

    The world’s leading thinkers and policymakers examine what’s come apart in the past year, and anticipate what will define the year ahead.

    Order now