Costello and Turnbull are complaining that if we go into deficit our grandchildren will still be paying off the debt. And what exactly is wrong with that, pray?
Let’s look back a little. In 1932 Australian governments were running a collective deficit of nineteen million quid. The bankers of the day objected to this profligacy, pulled the government into line, and by 1937 the governments were a million quid in surplus (pity about the depression, though).
If instead of cutting costs the governments had quadrupled the deficit in order to put more people in work, and paid for it by issuing 100-year bonds at 10%, Australians would now be groaning under the burden of paying back 99 million dollars a year, five dollars a year per head, or a swingeing 0.04% of the federal budget – except that that’s probably an overestimate, as the economy would actually be larger than it is now because of the higher growth on a larger base.
I don’t know about you, but I wouldn’t begrudge paying my grandfather ten cents a week. I suppose that’s why I’m not a banker.
Corrections to the blogosphere, the consensus, and the world
Friday, February 06, 2009
Actually, that's three rules, which I suppose casts some doubt on my arithmetic in this letter to the Age.
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