However, the real use of present value is the same as the computation of return on investment ~ to compare alternatives ~ not to estimate actual costs at some future period.
It's one of those things that's nice to use in the middle but not at the lims ~ where it leads to unrealistic expectations. E.g. Deutschland will not make a profit on increasing it's debt simply because they can charge a negative interest rate ~ nor will not go bankrupt because someone for the sake of analysis has decided to extend a higher interest rate 100 years into the future.
Same here ~ plus, we have assets, and as long as you have marketable assets you are not bankrupt.
“0% interest is as reasonable as 2% or 3% or 25% ~ if you were around under JimmuKKKatuh you know 25% wasn’t farfetched at all.”
Well, the long-run real rate of interest on U.S. Treasuries measured over many decades is far closer to 3% than 0% or 25%. So unless you can explain why people are going to keep lending to an irresponsible federal government that keeps on piling on liabilities, then 2.9% is FAR more reasonable as a long-term estimate than 0%.
Conversely, recall that Jimmuh was tossed out of office ASAP and long term interest rates were quickly dialed down to far more reasonable levels once adults were put back in charge. The notion that we would put up with 75 years worth of such presidential incompetence seems implausible to me. So 25% doesn’t seem as reasonable as 2.9% either.
“plus, we have assets, and as long as you have marketable assets you are not bankrupt.”
Our grand total assets including private, government, business etc., amount to $87.4T. Can you imagine any bank giving a mortgage to someone trying to borrow an amount that was 250% of the market value of their home? I realize that it’s not an exact apples-to-apples comparison, since we have not yet incurred those unfunded liabilities. They simply are promises at this point, but the problem is, hundreds of millions of Americans are planning their lives around those promises. So it’s not going to be easy to unwind those promises and get them down to more fiscally manageable levels.
And it would be immoral, in my view, to simply break those promises on the eve of someone’s retirement when they have little capacity to adjust to the shock of the loss of a large income stream they had counted upon. Piling on even more debt to pay for brand new promises is roughly the equivalent of buying your kid a new car knowing that by doing so, you will end up being unable to afford sending him to college as you’d long ago promised.