This blog contains posts and comments written by students in Dr. Tufte's economics classes at Southern Utah University.
1/24/2006
Woman with a Cause
As I was reading a blog this morning, I came across an amazing article. As I started to read, I was shocked to find out that a woman left an estate worth over $1.1 million to good ol' Uncle Sam for the sole purpose of shrinking the nation's muti-trillion dollar debt! While I don't think I would have done it, I admire her generosity, and cause. While national leaders are allowing the national debt to pile up with no end in sight, it is comforting, and reassuring to know that there are still fiscally responsible citizens in the world! I respect this woman because she obviously believed that the US should be operating in the black, and she didn't have to say a word, her money undoubtedly did all the talking! While her huge contribution will only make a dent in this country's level of debt, her conviction will leave massive impressions in all that hear her story.
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8 comments:
-1 on Blake's post for spelling errors.
The behavior described is problematic. It clearly shows that this woman thought that the national debt was a problem, and that she should do something about it.
The problem is, there are essentially zero macroeconomists who think the national debt is a problem. This "problem" is something that tends to concern politicians and the media rather than experts.
One especially troubling aspect of this is that when a government assumes debt they are essentially delaying taxes. Since we are in the midst of 350 years of economic growth - with no end in sight - it's hard to fathom why it is beneficial to reduce the tax burden of people who will have a better ability to pay than we do.
The one thing we know with certainty is that "the rich" will be much more common in the future than they are today. So, this woman has given them a tax cut. I hardly think that is how most people understand this issue (although perhaps they should).
I wish that I fully understood what Dr. Tufte was saying when he said that reducing the nation's debt reduces the tax liability of future taxpayers. Is it sound business practice to run an operating budget and accrue more and more long-term debt simultaneously? I would venture that no, it is not sound business practice. When I can watch the nation’s debt grow millions of dollars a minute (just hit F5 to refresh the page), I guess my economist sense leaves my body, and I think, “This debt thing is a problem.”
There are 2 issues in the comment.
The only ways to "pay off" government debt are with taxes of by printing currency (currently we don't use the latter in the U.S.).
So, the national debt is a sort of promissory note that will eventually turned into taxes.
This is a separate issue from whether the debt is "large" or not. Debts are only large if they exceed the value of the assets backing them up, or if their service is large compared to your cash flow. For the U.S., neither is close to being the case.
Of course it would be nice if the government didn't have any debt at all, but that isn't realistic. It probably isn't worthwhile to worry about the absolute size of the debt either - the U.S. government is the biggest operation in the world, so it shouldn't be surprising that it has the largest debt (it also has the most assets, employees, and so on ...)
Hey, Dr. Tufte, I found a spelling error in your post on the first line. Do I get a bonus point?
+1 for Boris
Hmmm ... maybe people will learn some more economics by going over my comments with a fine-toothed comb.
A couple of years ago I was on a tour at the Glen Canyon dam and was watching an exhibit that showed every second how much total income the dams in the state of Utah brought in. It would be interesting to see instead of the rate that national debt was increasing but the rate of income that was being brought in each second from taxes and the like.
At that specific moment the lady donated, the number was most likely a minimal amount higher. Put another way, the amount was most likely nominal in the sense of the total impact, a gentle tax break as Dr. Tufte would say.
Sure she could have put it towards cancer research or some other cause that would have felt more of an impact, but it was her money to give. It says something about what she values and others have put their money towards far worse ideals. It would tend make more sense to not look at the total value of her gift but rather what she got out of it, which is hard to measure.
Dr. Tufte said:
"The problem is, there are essentially zero macroeconomists who think the national debt is a problem. This "problem" is something that tends to concern politicians and the media rather than experts."
I always felt that the deficit was a problem. But Dr. Tufte's comments make sense: we are the world's largest operation so it makes sense that we have a large debt.
It also makes sense that we should have the largest deficits (if countries generally have them).
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