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Originally posted by Lurch@May 24 2005, 09:47 AM
Complicated way of saying public debt crowds out private investment, but ignores the fact that some level of debt is appropriate in order to finance capital investment by the government. Debt financed program spending is criminal IMO, but the last time Canada did that Mulroney was in charge. Debt-free is inappropriate as well b/c it implies taxes could be lowered while maintaining the exact same level of government services and investment, i.e. optimal capital structure is very rarely, if ever, 100% equity (paid for by taxes, in essence)
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Exactly. Debt to spread the cost of a bridge over a couple generations is OK. Debt to run the government is not.
I believe our $500-odd billion debt is net debt. Even if it were gone we would still have debt, just debt backed by assets. That's going from memeory though, can anyone confirm that?
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The government borrowing from Canadians is like you borrowing for your parents, thus any interest you pay stays in the family. If you borrow from the bank then it is like the country borowing from foreigners.
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I don't buy that. Debt held by Canadians does make us less susceptible to international shocks, but other than that it makes no difference.
For starters I'm not sure why paying the interest to Canadains automatically means the money is staying in Canada, but either way it still costs the economy a fortune to gather the taxes to pay the interest.