SOME THOUGHTS ON DECREASING THE FEDERAL BUDGET

There is the thought expressed by many that decreasing the Federal buget will decrease Federal borrowing and free up money for the private sector. But nobody is forced to buy government bonds, notes or bills (government securites). They do it of their own accord because Federal government vehicles are thought to be safe. So it really doesn't follow that the people that buy government securities will switch to buying less-safe private sector securites (stocks, bonds, etc.). More likely, it seems to me, that the people or companies that buy government securites will continue to buy them. If the securites become more rare, this continued demand will just bid up the price of the government securities. For example, with corporations, the only reason they will buy Federal government securities is that they don't know of any other place to invest the money profitably so want to park the money in some safe place depending on developments. The wealthy buy government securites because they are safe and not susceptible to state and local taxes. There are various reasons that foreign countries (like China) buy U.S. government securities, but certainly one component is safety. As far as balance of payments shortcomings are concerned, the foreign countries could buy private assets in the U.S. such as stock and property and some of this is done. But buying government securities do not conflict with buying private securities.