On Apr 20, 10:05 pm, RogerDodger  wrote:
> >> >> > We're talking about deferred taxes, not a
> >> >> > car purchase.  If the gummit runs a deficit,
> >> >> > that money stays in your bank account; a
> >> >> > float.  You loan that out to collect interest,
> >> >> > which you can use to pay the interest on
> >> >> > the debt, later.
>
> >> >They sell bonds to finance the deficit,
> >> >that's your gov't interest.  You PURCHASE
> >> >bonds, with your float.  That pays the
> >> >interest which you must eventually
> >> >cough up.  It's a wash... no loss.
>
> >> Options:
> >> 1) The govt sends you a tax bill for $10,000 and you pay it.
> >> Your cost out-of-pocket: $10,000.
>
> >> 2) The gov't borrows $X. It then sends you a tax bill every year for
> >> the interest, say 5%, on your share of $X, $10,000 -- so you pay $500
> >> per year forever.
>
> >> The present value of that $500 annually paid forever is $10,000,
> >> exactly, self-evidently.  Your cost out-of-pocket: $10,000.
> >> Now you collect $500 of interest on the bonds every year to offset the
> >> $500 of taxes you pay to finance the interest -- since you've bought
> >> your own share of the bonds!

Yes.  That's the 'present value'  calculation.

> >> Results of options...
> >> 1) You are out of pocket $10,000 paid now.
> >> 2) You are out of pocket $10,000 present value, paid over time.
> >>
> >> There ain't no free lunch for taxpayers in deficit spending and buying
> >> bonds.
>
> >This is astonishing, someone actually gets it!
>
> >That's right, no free lunch - but no extra cost lunch,
> >either.  Pay now, pay over time, same.  i.e. gov't
> >borrowing and debt incurs no "burden on our children"
> >(for the umpteenh time).
>
> Well, to the extent that instead of you paying the full cost of a
> government expenditure today through a tax bill, the government issues
> debt that your children will have to service into the future, obvously
> you *are* dropping a debt "burden on your children".
>
> Duh.

huh??
Your children inherit the float!


> The total present value of the tax payments is the same either way,
> measured as of today.

RIght!   Gov't deficits have no financial impact.

> But if one way you are paying all of them today, 100%, and your
> children aren't paying any, $0, while the other way you are paying a
> lot less than 100% and the children are paying the difference way into
> the future, now much > $0, well ... who is winning and losing there
> financially is pretty self-evident.

huh?  Present value is the SAME, remember?
Is your attention span 2 minutes?

> So when you have to cash in the corp bonds/stocks/whatever to get the
> funds to buy the T-bonds, you lose the return *from them*, right?
>
> You liquidate your $10,000 of corp bonds or stocks, use the $10,000
> proceeds to buy the T-bonds, collect $500 of interest from the
> T-bonds, use that $500 to pay your federal taxes -- and *lose* the
> $600 or $1,000 each year from the corp bonds or stocks you no longer
> own.
> Hey ...that ain't no "float"! ;-)

oh brother...

You have to pay the $10G tax anyway, one way
or another.  So you are poorer by..... $10G.  duh

Your blather re corporate bonds is immaterial.

> >> OTOH, if you really *do* want to benefit from the govt borrowing
> >> instead of spending, the thing to do is make sure you don't live
> >> forever.  Present value computations assume you will live long enough
> >> to pay all those annual future tax payments to service the debt.
>
> >No.  There is no need to live forever, to make
> >"all those future tax payments."  You only need
> >to pay the annual interest, with the income from
> >.... drum roll ....  the float.  Total time and payment
> >is irrelevant, for present value accounting.
>
> >In fact, there is no need to ever pay off the
> >principal, that's how finance works.
>
> No need to ever pay off the principal. Just a need to pay the interest
> forever . ;-)

Correct.
Finance not your forte, I see....

> Let's see...
> Year 1: The govt spends $10,000 for me but instead of sending me a
> $10,000 tax bill to cover the cost it borrows the money and sends me a
> tax bill for only $500 covering the interest. What a great deal!
> I pay only $500 to get $10,000!
>
> Year 2: Same thing. Now I pay $1,000 but get another $10,000 spent on
> my behalf. Still a great deal.
>
> Year 3: Same thing. Now I pay $1,500, but it's still a very good deal.
>
> Year 4: Same thing. Now I pay $2,000....

> AND you'd have me coming up with another $10,000 of cash  *each year*
> to invest in T-bonds for 21 years and counting, to use your "float" --
> where the heck am I supposed to get all that $210,000+ from???

I suggest you see a neurologist.

> And why are my grandkids -- who are inheriting this tax bill from me
> to pay forever, without the govt ever spending a penny for them --
> sharpening those knives???

It's paid via the FLOAT, Forrest!

> You can't buy $10,000 of T-bonds unless you have $10,000 invested
> in> something else -- like corp bonds -- to begin with, or you
> don't have the $10,000 it takes to do so.

oh brother, I feel like I'm talking to my dog...

Either you can afford your $10G tax bill, or you
can't.  If you can't, well....

If you can, you pay the $10G today, if they
insist - or they run a daffycit, and they collect
it next year.... in which case, you HOLD the
funds; a float, float, FLOAT.

> But then, alas, it would be very clear that there ain't no float here
> at all, you are just paying a new $500 in taxes each year from your
> pre-existing investment income. Reducing your net income by $500.

You got it, Forrest.  That's the thing about taxes... after
you pay them, you are poorer.
HTH

> Trading the corp bonds/stocks/whatever for the T-bonds, and then
> paying the tax bill with the interest from them instead, of course
> doesn't change that at bit.

> So your buying T-bonds makes no difference to the cost of taxes to you
> at all, zip, $0.00.  You are still out of pocket, made poorer, by the
> $500 of tax each year.

That's RIGHT!  So do you GET it or not?

> All it does do is enable you to confuse yourself into believing in a
> bogus "float" that comes to you from buying the T-bonds with money
> that somehow floats to you from nowhere --

It doesn't come from 'nowhere' - it's the funds
UNCOLLECTED by the gov't, which runs a deficit!

Incredible - this is supposedly an economics discussion
group, and nobody knows what a float is!


--
Rich