[When it comes to deficits and the national debt, which type of thinker are you: Type A, Type B, or Type X? How you answer the two questions below will help diagnose which it is.]
As we all know, when we let the tough questions slide instead of facing up to them, we're taking the easy way out. Procrastinating is something most of us have done at one time or another—but most of us have learned, usually the hard way, that reckoning day always arrives sooner or later. That's when the tough questions simply cannot be avoided any longer.
I think, or at least hope, that reckoning day is upon us regarding the deficit and the national debt. After many decades of avoiding the issue, it's time for us to belly up to the bar, face the two toughest questions of all, and answer them honestly.
So, regardless of how uncomfortable the following two questions make us as we read them, just this once let's try to come up with honest answers:
1. What set of current financial conditions would convince you that the deficit and national debt are not creating financial hardships today?
2. What set of future financial conditions would convince you that permanent deficits and a much larger national debt did not weaken the nation's financial condition compared to today?
Disquieting questions, aren't they? That's because they are both derived from the one question that psychologists tell us is uncomfortable for just about anyone, no matter which of our sacred beliefs is being called into question: "What would make you change your mind?" That question challenges our worldview, forces us to think outside our comfort zone, and puts us in the dissonant position of possibly having to make a few changes in our thinking.
Some of us, the "Type X Thinkers," will simply dismiss the two deficit/debt questions out of hand, as follows:
How can my worldview be wrong? Those two questions are just plain stupid; forget it, it's not even worth answering them. Anyone who would even ask those must be the dumbest person on the planet.
In other words, for Type X Thinkers, evasion (frequently camouflaged by tantrums and changes-of-subject) will once again become the easy way out.
Others of us might engage in a line of thought along these lines:
Let's see, debt is supposed to be bad because, sooner or later, it results in some combination of inflation, high interest rates, a laughingstock dollar, budget-busting interest on the debt, and high tax rates. Therefore, if those conditions are not the case now, and did not come about in the future even if we kept running deficits, I guess I'd have to think about possibly modifying my worldview.
To follow up, we'd then go get some data, asking and answering more questions as our discovery process unfolded:
We've been mostly in deficit and debt-runup mode for decades; is that bad? Well, let's see: Inflation has been low and predictable for more than twenty years; that's good for lenders. Interest rates have behaved similarly, and they are currently flat or falling; that's good for borrowers. A loaf of bread still costs a dollar, not a wheelbarrow full of dollars; that's good for consumers. Tax rates today are lower than they've been in a long time; that's good for taxpayers. Interest on the debt is less than ten percent of tax receipts, lower than it's been in years; that's good, too. Supposedly, financial doomsday has been "just around the corner" for at least the last thirty years—but it's starting to look as elusive as that troll I always thought lived under the bridge but perplexingly never did jump out and gobble me up; that's good news, too.
In short, if deficits and debt are bad, then where's the bad news? Truth is, our deficits and debt haven't had many bad effects at all yet. Furthermore, if we can find a way to keep inflation, interest rates, the dollar, interest on the debt, and tax rates at or near today's values—in spite of permanent deficits and growing debt—maybe future generations wouldn't be so bad off after all. Maybe; just maybe...
As a result of that thought process, some of us, the "Type A Thinkers," will change our minds about fearing deficits and debt per se, thereby following John Maynard Keynes's lead when he said:
"When my information changes, I change my opinion; what do you do, Sir?"
Others of us, however—the Type B Thinkers—will no doubt revert back to the old worldview:
Look: Don't confuse me with the facts; this is the no-spin zone, sir. Deficits and debt are bad, period. You know it, I know it, and the American people know it. That's my story, and I'm sticking to it.
There you have it. Are you a Type A, Type B, or Type X? (FYI: I used to be a Type X Thinker. Twelve years ago, I morphed into a Type A.)
