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Comment by gaius | Hacker News Reader

Here's the thing about the "young people" argument: the young, because time, live in a world built by the old. Everything from the physical infrastructure to the social institutions. So if paying for pensions is a wealth transfer from young to old, usage of the built environment is the opposite flow.

In other words, the people who built say the roads did so for a package of renumeration that included a salary and a pension. Now you are proposing to renege on half of that deal. Fine - but stop using the roads you didn't pay to build in the first place. Stop using the technology that you didn't pay to do the basic research for. Not such an attractive deal now is it?

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This is an appealing argument, it's only flaw is that it is nonsensical.

The current 'old' also inherited a built environment and a great deal of basic research, and if you project back far enough (not far!) they barely paid anything for it either. Those working in the 40s and early 50s paid almost nothing (in terms of having to pay taxes for other people's benefits) for the infrastructure that they inherited.

It also somehow suggests that the bulk of historical economic activity was the development of long-lasting capital works that outlived the users, which is odd.

I think we already have enough spurious arguments for feather-bedding relatively well-off old people without inventing weird new ones. The monumental voting power of the old has ensured that they collectively do pretty well for themselves; astoundingly well, say, compared to children living in poverty.

The current 'old' also inherited a built environment and a great deal of basic research

The current generation of pensioners paid towards the previous generation of pensioners without quibbling.

It’s only millennials who take it all for granted and don’t want to pay what’s fair.

OK, now you're just ranting and/or making stuff up. It's not actually true that the current generation of pensioners paid towards the previous generation, as social security taxation didn't really exist back then or was trivial in comparison in terms of #s of dependents and amount paid out.

Every generation takes stuff for granted, true. Also, they play their music too loud and disregard the eternal verities (c.f. ancient Greeks).

> The current generation of pensioners paid towards the previous generation of pensioners

The gaping holes in public-sector pension funds beg to differ.

And debt is an intergenerational tax that fully offsets your argument. The young didn’t run deficits.

With a fiat money system, there's no requirement to ever pay it off. It isn't like credit card debt. The central bank just issues more money.

Except in the UK we have a government who think that you need to run the economy like a household budget. They have been trying to cut spending to reduce debt since 2010. This has decimated public services, yet the debt is still there and deepening!

A course on Modern Monetary Theory wouldn't go amiss...

Yes it is like a credit card. You have to make payments and it reduces your cash flow. The Federal Reserve prints money not the government. And payments aren’t made with printed money.

In modern fiat money, the money isn't printed. It's created by issuing bonds and then counting those bonds as an asset. The money is created when the bank loans out money based on those bond assets.

If you believe it needs to be ever paid back, it hasn't been paid back since 1914. It just grows ever larger.

The initial 1914 version pegged the fiat money to gold. Like all pegging systems, they eventually collapse catastrophically, and this one did in 1929.

I disagree with the theory that we can grow our debt forever without consequence. I never advocated pegging to anything.

Private banks create money through lending, correct. Lending is constrained by the supply of creditworthy customers. Money is not issued by decree by the Federal Reserve or the government.

Deficits are not an intergenerational tax. They are funded by issuing bonds, which are assets that will get passed down through the generations.

There is not really any such thing as an inter-generational wealth transfer. There are transfers from poor to rich that the rich are (successfully) scapegoating old people for.

The bonds/loans are spent and have to be repaid with future revenue. A bond is a liability to the issuer not an asset. There is a transfer and it’s current rich from future rich.

>A bond is a liability to the issuer not an asset.

From the issuer's (government) perspective it is a liability. From society's perspective it is both a liability and an asset.

If it’s used to invest then whatever is purchased is the offsetting asset. Sadly, it’s being used to fund current operations which has no offsetting asset. The offset is retained earnings. That can and needs to be fixed. It’s how state governments run and they do a lot of investing.

There's nothing sad about using it to heal the sick, house or feed the poor.

Moreover, there's not necessarily anything "good" about having taxes pay for operational costs if those operational costs are cluster bombs on yemeni children.

There's not even necessarily anything intrinsically good about paying back those bonds in dollars that are of equal or greater value. Sometimes (e.g. in times of great wealth inequality) letting inflation eat huge chunks out of the value of outstanding bonds is the best course of action for society as a whole.

Ummmm... you got a little sidetracked. We can do all of that without also going into debt. We shouldn't constrain future cash flow when we don't have to. And we don't have to. During a recession, we have to.

No, we don't. Constraining cash flow during a recession is the worst possible way to react to a recession in fact. That's when stimulus is required in order to make up the anemic demand coming from the private sector (e.g. how China reacted to 2008, where they fared better than the rest of us thanks to counter-cyclical fiscal spending).

Deficit spending only really needs to be constrained when inflation is around 9% (~11% is the point at which inflation has a negative impact on growth).

During a recession you borrow money, spend and that constrains future cash flow. During an expansion you repay what you borrowed - that's the constraint.

We're constraining future cash flow during an expansion. That is stupid.

I am not sure how you keep mis-reading me.

I'm not misreading you. You're saying that spending constrains future cash flow. This is simply false. The US won't run out of dollars, ever. Japan won't run out of ten, ever. They have a 0% risk that they won't be able to pay back their debts because they print the currency.

The only risk is inflation.

Everyone’s a Keynesian in a downcycle...

It doesn't fully offset it. Avoiding debt by not investing leads to lower future growth prospects, resulting in opportunity loss. Debt is contractual and can be restructured.

Debt isn’t being used to invest. It’s being used to fund current operations. Otherwise, yes, using debt to finance investment is a good thing. That isn’t what’s happening at Federal level.

But the roads and that salary and pension are often paid for with debt - meaning that the younger generation is paying for it twice: both the taxes to pay that debt and the pensions for the people who did the work. Pensions that won't be there for the younger generation when they reach retirement age.

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