When Interest Rates Go Low, Should Public Debt Go High?

Is deficit finance, explicit or implicit, free when borrowing rates are routinely lower than growth rates? Specifically, can the government make all generations better off by perpetually taking from the young and giving to the old? We study this question in stochastic OLG models oriented toward this outcome. Unfortunately, Pareto gains are predicted only for implausible calibrations. Even then, the gains reflect improved intergenerational risk-sharing, improved international risk-sharing, and beggaring thy neighbor – not intergenerational redistribution per se. Low government borrowing rates justify state-contingent transfers between generations, not unconditional redistribution from young and future generations.