Sunday, 21 March 2010
20 hilariously incompetent academics display their ignorance in – where else – The Guardian.
This article is a peach. Signed by 20 academics, it claims that the best way to repay the national debt is via economic growth. And economic growth brought about by expanding the “knowledge economy”.
Now who benefits from expanding the “knowledge” section of the economy? Um . . er. . it’s academics isn’t it? No doubt fish and chip shop owners are all for favourable treatment for fish and chip shops.
Of course economic growth is good (assuming it’s within environmental constraints). But the idea that economic growth is needed to repay a national debt is just nonsense.
Incurring national debt in the first place consists essentially of one lot of people effectively paying taxes early and getting rewarded for this with interest payments. While another lot of citizens are temporarily excused paying taxes, though they have to pay tax to fund the above mentioned interest. (For the sake of brevity, I’ll ignore the complicating factors that arise when it’s foreigners that buy national debt).
As to repaying national debt, well this just consists of reversing the above process. That is, the less well off have to pay a bit more tax, and the money collected gets repaid to those who made the loan in the first place.
Assuming it is considered desirable to keep the relative incomes of debtors and creditors constant throughout this process, then obviously taxes on rich need to be reduced while the debt is outstanding and re-imposed when the debt is repaid.
Economic growth is totally unnecessary so far as repaying national debt goes.