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No One Cares About Public Debt

This may seem paradoxical. Because the public debt, everyone talks about it, all the time. For some it will ruin our children. For others, it is enough not to pay it so that everything goes well. There are NGOs that carry out a “citizen audit” to decide to three decimal places what fraction we will deign to pay (I should remember to talk to my banker about it). There are even conspiracy theories about the public debt, taken up by more or less serious people

But what experience shows is that when someone comes to talk to you about debt, they always have something in mind: debt is just a pretext for them.

The public debt test

If you don’t believe me, when someone comes to talk to you about the problem of debt. Ask them the following question. if he is more to the right, ask him how much the wealth tax, or the income tax , would have to be increased to reach a desirable level of debt and public deficit. If he is more on the left. Ask him how many teaching or nursing positions at the hospital. It would be wise to cut to eliminate the debt and the deficit. You can get in touch with Best Debt Advice In London

You will see, it works every time. The person on the right will inevitably tell you that increasing taxes is not a solution. That the real problem of the debt comes from the State which spends inconsiderately. That it is necessary above all to reduce public spending. The person on the left will tell you that the priority is to make those who do not pay their taxes pay. That the debt must be renegotiated, monetized by the central bank, or another solution: but certainly not to reduce public spending or social Security benefits. In short, for each of them, the debt is only the pretext to talk about what they consider to be the really important questions.

You do not believe me? So look at the business institute , which tweeted yesterday (see the image that illustrates this post) “public debt: why it must be reduced in the interest of all” with a link to click. You click on the link and what do you find? a long paper entitled ” why we must reduce public spending , in the interest of all “.

In both cases, the debt serves the same purpose: to draw attention to another problem. Institutional questions in the euro zone do not interest the general public very much (and this is deplorable); few people really want to go into the details of the reduction in public spending. Without the debt, these subjects would attract less attention.

Is there a real debt problem?

There are, however, countries which are suffering because of their debt. All the countries of the euro zone. Which have suffered the brunt of the consequences of the crisis. Starting with Greece. But their problems do not really come from the debt itself. Rather from the euro zone itself, its functioning and the policies that result from it. Japan bears a much higher level of indebtedness than all the countries of the euro zone, without this penalizing it particularly. The debts are the consequence of these dysfunctions of the euro zone , even if it is necessary to repeat it often.

More generally, debt is a way of financing public expenditure, like taxes, which has advantages and disadvantages, like taxes too. It has a cost: the interest that the government must pay. It involves a risk: if investors suddenly refuse to buy back the debt when it is renewed. The country must instantly equalize public spending and revenue, which is painful.

But wanting to eliminate debt instantly on the pretext. That in the distant future one might have to do so painfully is no more convincing. Than recommending that everyone stop drinking alcohol on the pretext that it is possible to become an alcoholic.

Criticism of public debt is steeped in contradictions. On the one hand, the debt is presented as a “facility” which allows governments to satisfy their spending instincts. On the other, the investors who buy the debt are presented as bogeymen (foreigners, of course) ready to devour us. The reality is simpler. Debt buyers want to be repaid, and pay attention to how the debt-ridden government behaves. They therefore play a protective role.

The real question

If you think that public spending is too high, or not very effective,  do you think the situation would be better if this spending was entirely financed by taxes, without public debt? It’s unlikely. First, it is always possible for a government to raise taxes, even if it is painful; politically, it is enough to carefully choose the people who will bear the bulk of this tax increase, among the political adversaries.

Second, if public debt has a cost, so do taxes. They reduce incentives to produce and work, and ultimately growth. And this cost is worse than that of indebtedness, because it is much more insidious and invisible, unlike the cost of debt which appears explicitly in the public accounts.

It is perfectly legitimate to wonder about the amount and effectiveness of public spending, good reasons to think that it would be easy to do as well by spending less. But approaching this subject solely from the angle of debt and the urgency of reducing it only leads to nonsense . Because since we got excited about the debt with great counter blows and alarmist speeches, very exactly nothing has happened.

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