Randy Wray — STATEMENT: House Budget Committee, “Reexamining the economic costs of debt”, Nov 20, 2019

This blog is based on the testimony I provided to the US House of Representatives. My written statement will be published in the Congressional Record (a version is also at the Levy Economics Institute: http://www.levyinstitute.org/publications/statement-of-senior-scholar-l-randall-wray-to-the-house-budget-committee. The full statement was co-authored with Yeva Nersisyan.I will argue that the Federal Government’s deficit and debt are not so scary as we are led to believe.Neither the deficit nor the debt ratio is on an unsustainable path. In some sense, chronic deficits and a rising debt ratio are normal.They are not due to out of control spending—now or in the future. They serve a useful public purpose. In any case they are largely outside the control of Congress....

New Economic Perspectives
STATEMENT: House Budget Committee, “Reexamining the economic costs of debt”, Nov 20, 2019

L. Randall Wray | Professor of Economics, Bard College

John Cochrane — A New Structure for U. S. Federal Debt

A New Structure for U. S. Federal Debt

A new paper by that title, here. 

I propose a new structure for U. S. Federal debt. All debt should be perpetual, paying coupons forever with no principal payment. The debt should be composed of the following:  

• Fixed-value, floating-rate debt: Short-term debt has a fixed value of $1.00, and pays a floating rate. It is electronically transferable, and sold in arbitrary denominations. Such debt looks to an investor like a money-market fund, or reserves at the Fed.
• Nominal perpetuities: This debt pays a coupon of $1 per bond, forever.
• Indexed perpetuities: This debt pays a coupon of $1 times the current consumer price index (CPI).
• Tax free: Debt should be sold in a version that is free of all income, estate, capital gains, and other taxes. Ideally, all debt should be tax free.
• Variable coupon: Some if not all long-term debt should allow the government to vary the coupon rate without triggering legal default.
• Swaps: The Treasury should manage the maturity structure of the debt, and the interest rate and inflation exposure of the Federal budget, by transacting in simple swaps among these securities. 

Of these, I think the first is the most important. Think of it as Treasury Electronic Money, or reserves for all. Why?....

Consols.
 

The Grumpy Economist

A New Structure for U. S. Federal Debt
John Cochrane | professor at the University of Chicago Booth School of Business, a Senior Fellow of the Hoover Institution, and an adjunct scholar of the Cato Institute

Coming from the University of Chicago Booth School of Business, a Senior Fellow of the Hoover Institution, and an adjunct scholar of the Cato Institute, one would expect a proposal for tax-free rent to subsidize the financially ailing rentiers.