I don't know if I understood the question correctly, but if public debts actually capitalizes into property prices, than today's owners of property should get richer when public debts increases. However, I cannot see why getting richer is interpreted be a burden after all. One can sell its property and thus take away economic value added by the buy-sell spread. Of course, when a real estate bubble is about to explode, the property owner will feel the burden of public debts at once. In the context of real estate bubbles and judging from the irresponsible government policy that causes them, I would look at this burden also as one resulting from debt-related government failure. To answer the question whether todays property owners or the next generation inheriting it will bear the burden, one should be able to know when the bubble explodes.

Ultimately, public debt is not that different from other forms - if the debt is used to INVEST in something that generates more value than is need to pay it back, it does not burden future generations. The problem with state debt these days is that it is often used for consumptive expenses, and do not contribute to the ability of future generations to serve the debt.

A core difference to private debt is that the net benefit/burden is calculated based on aggregated societal welfare - i.e. some members might be burdened with paying for it while the benefits go to other members of society. As for who ultimately bears the burden - the share of the population that pays taxes bears the direct burden, and the share of the population that does not receive benefits because tax income is used to serve debt shares an indirect burden (a form of opportunity cost). .

Public debt is the most asinine way to finance government spending: Now that we are in a fiat money regime, the Fed can create and lend government all the money it needs, without fear of inflation--just as it is creating money nowadays with its 'quantitative easing'. The main reason it cannot do so on a regular basis is because the financial system creates most of the money in circulation; that must be stopped, for the simple reason that it is unconstitutional.

(Continuation, Sorry, I was interrupted before)

And the answer to the question is: We owe the public debt to the proverbial 1%, who hold the government securities. Ordinary taxpayers carry a heavier tax burden than what they should, because the wealthy use all the power at their disposal to pay as little in taxes as they can get away with--aided and abetted by the DOPRs (Defenders of Rich People).

As to the burden to future generations: The effects of public debt on the present generation are bad enough--in terms of austerity measures, economic decay and unemployment--that looking for reasons to be more outraged by it seems to me like an unhealthy exercise, especially when--as with most of our other economic problems--the solution is at hand.

That last paragraph prompts a question of my own: Why people seem obsessed in discussing problems instead of discussing their possible solutions? Of course there are many who are not really interested in finding solutions but in adding to the prevailing confusion and general ignorance even among the supposed experts.

(Correction) I meant DORPs, instead of DOPRs.

Public debt can only be seen as a burden if it is used to pay current expenditure (most of the times salaries of public servants), as opposed to investing in infrastructure such as public roads, hospitals, schools, etc.

The question of whether the public debt could be a burden for future generations, I completely agree with Ellen's approach. I would also add that if a government is fiscally responsible can acquire n 5-10 years, and in those cases future generations are not affected.

I would say that public debt is always a burden: it had to be financed by higher taxes. What makes matters worse is that the tax burden falls unfairly on ordinary people.

One of the most serious misconceptions about money, and taxes, is the general belief that the money spent by government, within or beyond its budget, disappears in the economy--and many people also believe that most of that money is 'wasted'. In reality, that money circulates in the economy and ends up in the pockets, or the accounts, of those who can afford to save substantial portions of it. Thus the "1%" benefits three times by government overspending, once by sharing in the public benefits, again by selling the products and services ordered by the government, and a third time by the collection of interests to the debt:

No one, to my knowledge, has study the precise distribution of the money spent by government within the nation's population, but it is not unreasonable to assume that it even more skewed than that of ordinary income. The point ii that government spending is collected by the people and should return--a 100% of it--to the government in the form of taxes or other revenues, so the business of government can continue. If everybody paid his or her fair share of taxes--those with higher income paying a larger percentage in taxes--then the fiscal budget would be balanced, except for new public investments which should be financed by direct loans from the Fed. In conclusion, privately funded public debt should disappear. Government securities may continue to exists, but for private savings purposes, and not for government indebtedness.

In the case of the United States, we do not have sufficient private savings to finance our public debt. Therefore, we do not owe it to ourselves. In the case of high saving Asia countries, such as Japan, they have sufficient private savings to finance their public debt. I hope that this helps.

An older (Abba Lerner) way of thinking dismissed the idea that debt is a burden on present and future taxpayers unless the debt is held by "foreigners". That plainly is wrong (see, e.g., the two-volume The Economics of Budget Deficits, edited by Rowley, me and Tollison, published by Edward Elgar in 2002). Would the debt financing the purchase of your home be any more burdensome if was owed to a lender in Frankfurt rather than owed to JPMorgan Chase? I don't think so if one of course ignores exchange rate risk, the counterpart to deflation risks for borrowers from domestic lenders.

I don't know if I understood the question correctly, but if public debts actually capitalizes into property prices, than today's owners of property should get richer when public debts increases. However, I cannot see why getting richer is interpreted be a burden after all. One can sell its property and thus take away economic value added by the buy-sell spread. Of course, when a real estate bubble is about to explode, the property owner will feel the burden of public debts at once. In the context of real estate bubbles and judging from the irresponsible government policy that causes them, I would look at this burden also as one resulting from debt-related government failure. To answer the question whether todays property owners or the next generation inheriting it will bear the burden, one should be able to know when the bubble explodes.

Sorry -- I was answering the question posed in the headline.

This is a reply to Mark Rider:

Dear Mark:

The idea of ‘low saving rate’ in the U.S. is a complete canard. In reality, in any modern economy, the total accumulated savings is almost equal to the total amount of loans outstanding (about $50 trillion). Since money is conserved—yes, almost like matter and energy in physics—everything that the government spends goes from hand to hand until it all ends up as savings—normally, domestic savings, unless the country in question suffers from a persistent trade deficit. The total fiscal debt in the U.S. is about $16 trillion, and only--it is a relatively small amount but a huge amount of money in absolute terms--about six to eight trillion dollars have gone abroad because of our trade deficit. Thus, the only reason foreigners can ‘help’ in ‘financing’ our public debt is because they have nothing better to do with their trade-surplus dollars, and definitely not because of their domestic savings rate.

I know that the idea of the ‘low savings rate’ is widespread among conventional economists; but that doesn’t make it right. I am sorry to singled you out for criticism, but you were naïve enough to write about it.

@William li: Sorry for the confusion, I was actually doing the same.

Public debt may not be a burder to taxpayers if these debts are utilized in order to create additional capital stock which would in turn generate income and employment to the people. What is important is that government, who is responsible in creating better economic environment uses these debt for the betterment of the economy and the people. However if publid debts are simply pocketed by people in the government for their own personal interest then this makes the public debt burdensome to the taxpayers since they payment of these debts will be shouldered by the taxpayers although they have not benefitted from them.

In a pragmatic setting, public debt is not a burden but an asset. Wealth of a nation is debt plus resources (natural, human, cultural and financial). There is no nation that can develop without debt system either internationally or locally. Assets of corporate organisations are defined as debt plus equity. Where the government is not accountable to the debt it has incurred on behalf of the people, then it is the fault of the people. It is either because they have inferiority complex to the leaders or they suffer from poverty of knowledge. A nation gets the type of government it deserves. The principles of Value Management says governments should not go for public debt without the consent of the stakeholders (members of public). So if the public jointly approve the procurement of debt with the government and fail to ensure that the fund is directed to the development of public infrastructure, then it is the fault of the public.

@Olufemi Oyedele: Your answer represents a very classic assessment of the issue. But for it to be true you need to assume that people act based on classic rationality. Over the past decades, research has shown, however, that human decision making suffers systematic distortions with regard to understanding future cost. Rational choice research has furthermore shown that the assumption of 'informed decision making' only applies to elites, because the cost of collecting information is usually too high for those not immediately involved in the decision. This is one of the reasons we have representative political systems - and the reason why it can be exploited by the decision makers.

Of course, technically speaking, you can blame the electorate for not supervising corrupt officials more closely. (Using debt to finance investments or expenses that are not in the public interest is a form of corruption, after all). But why would we want to advocate a system that protects the exploiters and puts the burden on the exploited?

1. altruism of the state or any political authority is construct - in representative democracy is just he question of redistribution of taxpayers money between "butter and cannons"

2. Do we owe to ourselves - did we spend the money? State did, not society, so logic would be that state owes us money but here we are coming to the question where money was borrowed. In the case of external debt - state owes taxpayers nothing. in the case of internal debt state owes taxpayers. However, next step is who is paying off the debt - taxpayers - so state indebted current and future generations of taxpayers. So at this point it appears that, yes taxpayers owe money to themselves but only indirectly because they were not directly responsible for the debt (i understand the indirect involvement in political decisions by electoral result but i refuse to take argument that those in power work in public interest)

3. another option is to raise or introduce taxes - in this case state is able to finance more things without increasing the public debt. well in any case more than existence of public debt itself i see as crucial the question - how state uses the "loan" and what is the pay off plan.I have strong feeling that state borrows the money, uses it without clear positive effects on quality of life and doesn’t care how the debt will be paid - because the generation of decision-makers which indebted the state in year x will be probably out of office ten years later.

@Ellen Pfeiffer: I do not fully agree with your arguments concerning the findings of rational choice research. From an economically rational point of view, it would be perfectly true that democracy is the best representative system we currently know. On the other hand, imperfect information is only one of many possible sources for the existence of corruption. In particular, it is well known from behavioral economic research that people sometimes act in a irrational way. Up to date, I cannot think of any practical mechanism that would allow supervising corrupt officials effectively and at low cost. However, this does not mean that we should also advocate a system that puts the burden on the exploited. To solve the agency problem, we might introduce a political system where the officials rather than (future) tax payers have to pay the costs of political mismanagement for which they are held responsible. For example, wrongdoing officials would have to buy additional certificates from the electorate whenever they have done something that maximizes their own benefit rather than that of the electorate. Thus we would be able to circumvent the underlying information asymmetries by providing government officials with the necessary incentives to avoid government inefficiencies like corruption.

@Andreas Zweifel: The issue I was referring to is only a smal aspect of rational choice theory, but closely linked to some of the things you wrote. You state that we know that people act in an "irrational way" sometimes. A different way to phrase this finding is to say: Our current rational choice models best explain the behavior of people that are well informed. Empirically, we find that only a small subset of people shows this level of information.

The difference is simple: If you call people irrational, you postulate that people SHOULD be informed - making the empirical finding the result of a flaw in people. If you frame it the other way around, you make room for the possibility that not getting information is the normal or superior state for humans (information collection is expensive and might be economically inefficient). In this case, it is the model that is currently limited or flawed, because it cannot account for the level of information collection people exhibit. Does the phrase "people act irrationally" not just deflect the need to admit "my scientific model has no explanation for what I am seeing"?

Why is this important? Because phrasing our findings in terms of how the world deviates from out models encourages thinking about the world in terms of our models. Subsequently, it encourages policy designs based on limited models that only apply to a theoretical world. I do not know much about the idea of certificates you mention, but they seem a case in point. Its implementation seem to require a type of information that should prevent the problem from occuring in the first place. (How would you even start to calculate personal versus social benefits?). Issuing them would likely suffer the same problems that we want to solve. Is it really a solution?

Looking at the agency problem from a world of non-model humans, I am currently mostly wondering about how we might improve processes of agent selection, and other "prevention-oriented" issues. But that just happens to be my starting point, I am not claiming that it will deliver better results than any other approach.