The government’s deficit and debt are not a big crisis.
It’s not even a little crisis.
It’s not a crisis at all.
Oh, don’t get me wrong: there is a huge crisis in America. But, it has very little to do with the “crisis” of the government’s deficit or debt. We have plenty of money, or access to money, and any money issues we have are all quite manageable. This is still the richest nation in the history of the planet.
The question before us is simple: what are our priorities as a country, how should we spend our great wealth and who should pay to advance
those priorities?
But, that has nothing to do with a fake and phony crisis.
Have I said this yet? There is no government debt or deficit “crisis”.
Stupid Statement #1: The government is going broke because of a rising deficit and long-term debt.
My head hurts each time I listen to politicians and so-called “experts” on television talk pure rubbish when it comes to explaining how the economy works. They even mix up the ideas of “deficit” with “debt”.
So, let’s get some basic concepts right before we go any further. When we talk about the government spending more money each year than it takes in, that is the fiscal deficit. If you add up all the government’s annual fiscal deficits over a period of time, that adds up to the overall national debt. So, for example, running smaller deficits each year still adds to the overall, long-term national debt.
So, is it a bad thing to have either an annual fiscal deficit or a long-term national debt? That depends.
When the government runs a deficit, ask these questions: what are we spending the money on? Is it going for a long-term public investment (like roads, education or energy efficiency)? Are we building schools to make sure kids are well-educated, and not illiterate? Are we investing in an advanced information and physical infrastructure so the economy keeps humming along in a productive way?
Or are we, the taxpayers, paying for other things—like tax cuts for the very wealthy or cleaning up the savings and loan scandals—that do
not add to the overall public good?
If we are putting money into things that make the lives of everyone better, that is a good thing.
If we are only helping billionaires buy another yacht or a $10,000 bottle of wine or a Picasso to hang in a 10-room Park Avenue home, well, that’s a waste of money.
In 1946, for example, the country’s debt-to-GDP ratio was 108.6 percent. In other words, the debt we owed was larger than the entire
output of the whole economy!
So, remember this, and brand it on your brain: the adults living right after WWII were handed the greatest debt the country had ever had BUT that generation experienced the greatest prosperity in the country’s history— and maybe even in the history of humans.
Today, the debt-to-GDP ratio isn’t even close to that. Even the most end-of-the-world forecast says the debt-to-GDP ratio might reach 66.7 percent by 2020—hardly something to be panicking about. That means that we’d still be wayyyy below the post-WWII era.
