Well, yes, but….

It’s important to note that when bonds are repaid this does not usually, if ever,
impose a cost on tax revenues. The government repays bonds that come due for
repayment by issuing new bonds at current interest rates. The funds redeemed
are usually immediately reinvested in new bond issues so that, as the graph of
government borrowing noted above shows, net repayments of bonds almost
never take place. We expect this to continue in the future.
In that case bond issues can fund the investment required for the Green New
Deal programme and there is no need to plan to repay the borrowing in
question: historical precedent shows that this repayment does not happen. That
said, if it was desired that repayment take place then it might be funded in four
Reason for
Reason the repayment arises
The asset invested in
pays a return that
allows borrowing to
be repaid out of the
surplus made
• The surplus earned on renting social housing
• The savings made from investing in energy saving
• The return on investment in new methods of
energy generation
• The trading surplus from selling services e.g. for
the use of new transport systems
• The profit from investment in new technology
The investment
promotes economic
activity that results in
more tax being paid
because more people
are employed
• Investment in the economy creates what are
called ‘multiplier effects’. This means that not only
does a pound invested become the income of the
person who works on the investment project, but
that when they spend the proceeds that often
involves paying others who in turn spend more.
Given that tax is paid at every stage of this
process government investment has been shown
to be more than capable of paying for itself in tax
terms by simply promoting more economic
activity, as the Green New Deal would do.

The bottom of the page rather contradicts the top, no? If all this government investment financed by borrowing has a multiplier effect which repays the debt then why is the debt never repaid?

3 thoughts on “Well, yes, but….”

  1. Its always the new as yet unspent borrowing that pays for itself, not the old borrowing, thats different because reasons……..

  2. Anyway it isn’t true in the first place. Any government that listens to Keynes will repay borrowings during the boom part of the cycle

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