Time Magazine just ran a hysterical cover story entitled “The United States of Insolvency,” contending the U.S. national debt is out of control and that every American owes about $43,000 because of it.
Baloney.
1. Only a third of the debt is owed to foreigners; two-thirds of it is owed to American investors. So the real amount the average American “owes,” on net, is about $19,400.
2. The federal debt is dropping relative to the size of the U.S. economy (the debt is growing by about 3 percent a year while the economy is growing by 3.4 percent), which means it's sustainable.
3. We wracked up much of the debt during the Great Recession but as the economy recovered, higher taxes brought in more revenue and spending was reined in. This is standard Keynesian economics -- the way the system is supposed to operate.
4. If anything, the U.S. government turned to austerity too soon. Too many Americans are still out of work or underemployed to justify the current degree of spending cuts.
5. We’re not spending nearly enough on infrastructure or education. This kind of debt is “good” debt and shouldn't be lumped in with other debt because it grows the economy of the future. It thereby reduces the future ratio of national debt to the overall national economy.
6. True, we're got a problem over the next 20 years because boomers are retiring and will need far more Social Security and Medicare. But that’s why we need to raise the cap on income subject to Social Security payroll taxes, and also allow Medicare to use its bargaining clout with hospitals and drug companies to reduce costs. And also move to a single-payer system.
Bottom line: The national debt is the last thing we should be worrying about right now, and future debt requires us to make reforms we should be making.
What do you think?
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