I’d strongly recommend that you read this piece by Jeff Spross, entitled “The Debt Everyone is Freaking Out About Does Not Exist”, in full. It’s a very smart and sober primer explaining…well, exactly what the headline says.
Yes, Washington D.C. and the corporate media which cover it, are spending a whole lot of time and resources playing into what amounts to a massive presentation of kabuki theater, and its not one that actually helps us with the addition of new jobs or economic growth in any real way whatsoever. Arguably, as Spross explains, it may well accomplish just the opposite.
It’s difficult to select just the key passages from the piece, as mentioned, since it’s chock full of smart analysis throughout. But, for those without the patience to read the whole thing, here are a few of the central thoughts that you should educate yourself about…
So the debt that’s got everyone worried is the part we haven’t yet incurred. And that debt, by definition, does not exist. It’s not a certainty, it’s merely a projection by the Congressional Budget Office. And trying to model how the federal budget, not to mention the entire American economy, will behave years or even decades in the future is a devilishly treacherous business.
For instance: one of Rep. Paul Ryan’s (R-WI) favorite talking points in 2011 was that the computer simulations CBO uses to model the economy crash when they attempt to account for the debt load in 2037. Imagine trying to model the 2011 economy in 1985. Things you’d never see coming include (among other things) the Internet, fracking, massive advances in computing power, the renewable energy boom, three wars, a massive recession, and Harry Potter. And predictions can be hard even over shorter time frames. In 1995, CBO predicted the deficit in 2000 would be well over $200 billion. We ran a surplus of $236 billion.
In fact, Ryan plastered dramatic graphs of debt going out 75 years onto everything in sight while stumping for his last budget. Forget predicting 2011 in 1985. That’s like predicting 2011 in 1940.
So neither the impending Baby Boomer retirement nor growing health care costs make astronomical debt a certainty, despite the insistence of the conservative and centrist punditariat. With respect to the Boomers, economist Dean Baker ran the numbers and found that if productivity growth in the economy clocks in at one percent until 2035 (a very conservative estimate) the resulting gains will swamp the added retiree burden.
Spross goes on to explain how even the freak out about rising health care costs, and the threat it is said to pose to Medicare and Medicaid should not be taken for granted either, since it’s based on curves that change, for different reasons, over time. It has already begun to change, he notes, as health care costs have “unexpectedly slowed to a 50-year low since 2009,” about which he adds (and explains why): “We probably have Obamacare to thank for that.”
He argues that we are, essentially, “fixating on a problem that may or may not exist,” and by doing so, “Policymaking becomes less about solving concrete problems … and more about made-up numbers on an Excel spreadsheet.”
Both in Europe and here in America, we have tax codes that by their nature bring in less revenue when the economy goes into a downturn, and a series of safety net programs designed to ramp up when unemployment rises. The vast majority of the deficits we’ve seen since President Obama took office were due to the 2008 collapse. Under depression conditions, deficits are a feature, not a bug.
But these excerpts, even as extended as they are, don’t do the full story justice. As I said, do yourself a favor and go read the whole thing.
By way of just one more piece of added perspective on this issue. Here is the public debt-to-GDP ratio for a whole bunch of developed countries, and for the world as an average. As you can see, in 2010, the U.S. was below most of the other developed nations on this score, and just a touch higher than the average of world countries…
If you followed the news of late out of Washington, however, you’d think we’re on the brink of complete debtpocalypse! That’s a pretty clear victory for D.C. Republicans, and, as usual, a clear failure of both Democrats and the U.S. corporate media.
Jeff Spross talks about the inaccuracy of predicting the economic health of the nation (through our debt). I would like to see someone compare the economic predictions of these supposed “economic gurus” to the scientists who predicted in 1990s how bad the climate crisis would be. I have been a follower of the climate change reporting since I was in graduate school in the mid 90s. Though I am sure I missed a few reports, I have noticed that most of the preidictions for climate change were conservative (underestimating the future problems) either because they had a few sets of data that they were unaware of/unsure of their importance, they didn’t want to freak everyone out, they didn’t want to be seen as fear mongers, or they were hoping to attract attention to the problem while it was still fixable.
I would guess that predictions of our economy back in the 1990s are less accurate than the climate predictors, yet economists are taken more seriously by the media than the climate scientists. It seems belief is more important than evidence and data to the MSM and the political powers that be. Climate change is more important to our economic well being than our current debt. Without the climate providing us a comfortable and predictable environment to live in, it won’t matter if we have debt or not.
The people freaking out are also the ones who voted for the Republicans with the Ryan plan of deficit spending for the next 30 years versus someone who has decreased the annual deficit the last three years.
In other words, delusion is a real and present danger to the citizenry.
The delusion of some of those people in government, whose minds have become corrupt, means they are not in touch with reality.
Hence the germ theory of government gets ratched up another notch.
The best line is right here:
“If we stopped adding to it tomorrow, the debt as it stands would pose essentially zero threat to the country’s fiscal health, as the ongoing growth of the economy would send our debt-to-GDP ratio dropping like a rock.”
Yes, exactly. If we had a balanced yearly budget, we would stop adding to our deficit every year. We’d pay off our debt just like any normal person pays off a note on a car or a house, and we’d naturally grow out of the debt and pay it off faster and faster until it was done.
Hear hear! Bring it on! We currently don’t have any plans for such a balanced yearly budget – we aren’t even close. But if we did it, it would work!
Clinton came closest with a projected ten-year surplus, including the overpayment of Social Security as a credit. Bush came within 200 billion dollars for a couple of years. But neither of these were a balanced yearly budget.
Hey, Brad, where’s China in the Debt-to-GDP standings?