The Democratic Party’s chances at keeping the White House this November are looking good at the moment, so that means it’s time for deficit scolds to jump out of hiding and scare us all into thinking the federal debt is coming to eat our children.
The first real “boo!” of the election season is last week’s Time cover story by James Grant. The Time cover does some basic arithmetic and tells us that every American man, woman, and child would have to pay $42,998.12 to pay down U.S. debt. If we follow Time‘s lead and analyze information as if we were children, that means infants had better start polishing up their resumes. Stop soiling your diapers and get a job!
The article gets off to a bad start when Grant makes the trite observation that if America were a household it would be in bad credit trouble. Except the United States of America is not a household, but a country that has granted its federal government the authority to create and regulate the money supply. How many of you have a legal dollar printing press in your home? This apple is nothing like this orange.
For a good rundown of just how wrong are Grant’s premises and why the federal debt is nothing to fear, read Jeff Spross’ article at The Week. Paul Krugman reminds us that Grant is wrong on his signature issue of inflation, is a gold bug, and increased and well-targeted deficit spending now would likely improve the country’s long-run fiscal outlook.
I’ll leave the economic and journalistic criticisms of Grant’s article to the above experts and two more here and here. If I can add any value to the discussion, it may be on the political side. Polling consistently shows that a majority of Americans are worried about the federal debt in the abstract. This makes sense, right? Most Americans understand that carrying debt can be bad because if they have too much and can’t pay back some of it then the bank or a repo person comes and takes their house or their car. This is why we hear Republican candidates for president constantly talking about federal debt in existential terms.
However, polling also consistently shows the following: Americans are deeply confused about the nature of the federal debt, oppose practically every spending-side policy that might reduce the debt, and overwhelmingly support the very revenue-side policy for addressing debt that Grant and his ilk take off the table, which is raising taxes on the rich. At best, deficit scolds like Grant and Republican candidates for president are deeply confused themselves about the federal debt and the solutions majorities of Americans support in order to address it. At worst, deficit hysteria is cover for an agenda that majorities of Americans actually oppose: tax cuts for the rich and cutting programs such as Social Security, Medicare, etc.
We’re going to hear a lot of deficit nonsense from Republicans during the general election. Remember that whether their motivations are sincerely held but wrong ideas about the deficit or cynical manipulation of opinion in order to enact an unpopular agenda, the U.S. government is not like a household and the federal debt is really not a big deal. The country faces many challenges. The Monster of Krakow is not one of them.