Although I sat down a few days ago to assemble a “National Debt FAQ,” I didn’t accomplish that mission; I got sidetracked. The image above kept popping into my head, so I scrapped the FAQ idea and ended up with “National Debt Whack-A-Mole.” It’s the game I’ve been confronting for more than a decade, and blogging about for more than a year.
Anyone who’s been watching this site already knows that the National Debt Whack-A-Mole game is 98% politics, 2% economics. Note that each mole’s complaint is a concise, eye-catching phrase, ready for use by:
• any “economics” correspondent with a political ax to grind;
• any campaign staffer in charge of bumpersticker production; or
• any Blue Dog Democrat, anytime anywhere.
[Side note to anyone who knows Blue Dog Democrat Reps. John Tanner, Dennis Cardoza, or any of the others: If the graphic above gives them any new ideas for big, silly signs to parade around the House floor while the C-SPAN cameras roll, please tell them to cite this weblog as their source. The Skeptical Optimist logo at left is free for the taking.]
How to win "National Debt Whack-A-Mole"
Just in case anyone would like a refresher on how to whack 100% of the moles, here are the snappy comebacks. (Sufficiently thorough responses would be lengthier, but here I opted for brevity. The links provide more info.)
1. “It's a crushing burden on our children and grandchildren!”
No it isn’t. Not if the size of our economy keeps growing at least as fast as the debt. Besides, our grandchildren will inherit the T-bonds; that’s not a burden, that’s an asset.
More here and here.
2. “It's $29,000 for every man, woman, and child!”
So what? They’ll never have to pay it back if the economy keeps growing; they’ll just keep rolling it over, just like we’re doing today. Besides, today’s GDP is $44,000 for every man, woman, and child. That’s very important, yet you never mention it; why is that?
More here.
3. “It would stretch to the moon and back four times!”
Balderdash. The national debt is so tiny we could spot-glue it into one little dimple of one little golf ball and watch Tiger Woods swat it a mile.
More here.
4. “We're indebted to a bunch of foreigners!”
Not really all that much. And besides, why is that so scary? It didn’t scare Milton Friedman, it shouldn’t scare you. And if foreign-held debt is still too scary for you, then why not domesticate it by letting those foreigners immigrate more easily?
More here and here and here.
5. “Interest on the debt buys us absolutely nothing!”
Hold on there; didn’t the principal buy us something? And let’s not forget that uninterrupted interest payments buy us our creditworthiness. That’s what keeps investors interested in lending us their principal, at low interest rates.
More here and here.
6. “Deficits cause higher interest rates!”
Then how come interest rates and deficits have a track record of going in opposite directions?
More here and here.
7. “The present value of unfunded liabilities is $78 trillion!”
That’s just single-entry accounting in disguise. What sense does it make to do NPV analysis on just one side of the balance sheet? Why not also calculate the NPV of the yet-unrealized future assets we’ll create by growing our economy, our incomes, and our ability to finance our obligations? If someone would do that, and be open and honest about the growth assumptions they used, we could calculate a meaningful debt-to-assets ratio—instead of arousing hysteria about a single, scary-looking liability number.
More here.
8. “The trade deficit makes us the biggest debtor nation!”
What’s wrong with foreigners investing in the USA? They seem to like our labor markets, our real estate, our economic strength, our internal stability, our dollar, and our T-bonds. Wouldn’t it be a bigger problem if they lost confidence in those things?
More here, and more in this book.
9. “We'll never be able to pay it back!”
That’s highly debatable, but more importantly: it's irrelevant. We won’t have to pay it back if we can sustain a healthy, growing economy. Then we can just keep rolling the debt over, and over, and over, and over. Forever and ever and ever. Harmlessly.
More here.
10. “Baby Boomer retirements will crush social security!”
If anything crushes social security, it will be xenophobic immigration laws and policies that exacerbate the coming boomer-driven reduction in our workforce. We should be welcoming economically productive and promising immigrants into the USA at several times today’s rate. Reason: Sustained economic growth requires two things: (1) growing productivity-per-worker, and (2) a reasonably level or growing number of workers. The first is highly likely, and might carry the day in spite of other problems (more here and here); however, the second is where we just might shoot our foot off by letting the “close-the-borders” knuckleheads get their way.
More here.
11. “Deficits go out as far as the eye can see!”
Whoever says that can’t see very far at all. The deficit is shrinking, not growing.
More here.
12. “Interest on the debt is a transfer of wealth to the rich!”
No, that's wrong; it’s the other way around. The rich pay a higher percentage of the taxes than the percentage of the debt they own. That means the interest payments (made from those tax receipts) create a net drain on the rich, and a net gain to the non-rich.
More in this book.
13. “The USA is already bankrupt!”
If that’s true, then how come the creditors only want 5% interest?
More here.
That’s it. Have fun whacking those moles whenever they pop up.
