By John Tamny
EVERYTHING THEY TELL YOU IS WRONG... INCLUDINGWHYWE EVEN HAVE THEM DEFICITS
CLICK HERE TO READ THE WEB VERSION
It was the largest non-bank debt deal in U.S. history... The company was Apple, and it was 2013. The Cupertino, California-based technology behemoth was riding a lucrative sales wave created by feverish global demand for its iPhones. Apple subsequently floated $17 billion worth of debt at rates of interest almost equal to what is charged to the U.S. Treasury, which borrows at the lowest rates in the world. Investors were more than eager to own a piece of the company’s future earnings. Last month, President Joe Biden imposed sanctions on Russia that included limits on U.S. financial institutions making markets for debt issued by the country’s government. Presently, Russia has 14 trillion (rubles) of total debt, which amounts to $190 billion. There’s a budget deficit lesson in these unrelated anecdotes, though probably not the one you’ve been conditioned to believe...
(Full disclosure... What you’re about to read is not a defense of government spending or deficits. Government spending is a cruel tax on growth. Period.) In reality, Apple’s massive bond offering and Russia’s small (relative to the U.S.) liabilities were and are a resounding rejection of much of the conventional wisdom surrounding government debt. The Left and Right preach that it results from insufficient tax revenues relative to spending, only to promote opposing policies meant to increase revenues. Their analysis is precisely backward... To see why, it’s useful to start by addressing the popular view that deficits signal country decline.
American Consequences
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