Allow me to begin by revealing a bit about my personal finances: I owe more money today than I have ever owed in my life. If someone had told me when I was 25 or 35 years old that I would one day owe as much money to various lenders as I do today, my younger selves would have been incredulous. Older Neil is swimming in debt!!
But that is simply wrong. In fact, my financial situation is stronger today than it has ever been, with my net worth (notwithstanding recent swings in the stock markets) at a pleasing level and my debts (almost entirely consisting of mortgage borrowing) easily manageable. Even so, if one were so inclined, it would be possible to say that I have engaged in “lifetime-high levels of borrowing.” Somehow, however, I remain unfazed.
When it comes to discussions of the US national debt, even news reporters who are supposedly sophisticated about finance and economics write some of the most naïve things imaginable, very much along the lines of what I just described above. Why are they not corrected, mentored, or fired? Because their editors and publishers believe the same ignorant nonsense, and it sounds deeply serious and responsible for reporters to infuse even supposedly neutral news stories with tut-tutting about government debt.
In this way (as in many others), the US press is anything but the liberal handmaidens that Republicans accuse them of being. Today, I will use a recent fearmongering piece in The New York Times to expose the almost-funny lengths to which reporters and headline writers go to overhype the US debt situation.
What makes this specific example so notable is that there is absolutely nothing newsworthy to justify running the article in The Times, yet they published it anyway. But why worry? It is not as if there are genuinely important news stories that should be getting our attention, are there?
In this two-part column, I will devote Part One to political and rhetorical observations about the way the reporters for The Times misleadingly frame a familiar (and wrong) anti-debt argument. In Part Two tomorrow, I will explore and debunk the only substantive claim that makes its way into their article.
Fair warning: As the paragraphs above suggest, today’s column will include a heavy dose of sarcasm—richly earned sarcasm, to be sure, but I make no pretense to having tried to restrain myself. On each of the numerous opportunities that arises, I respond appropriately with mockery and even derision.
When In Doubt, Pander to Fears of the National Debt
I should state clearly that my invocation at the top of this column of my personal finances as an analogy to national borrowing is not in any way meant to say that federal borrowing is “just like” household finances. Many politicians (of both parties) and credulous reporters apparently believe that it is a sign of sagacity to offer up lines like this: “Just as families have to tighten their belts in tough times, governments must learn to live within their means, too.”
But that is disastrously wrong, because when families are struggling, that is exactly when the government must step up and support the economy with expansionary policies (tax cuts for middle-class and poor people, and spending increases on programs like food and rent subsidies), meaning that the government must increase its deficit and add to the national debt. That is, to be clear, good economic policy.
This, in fact, was the situation that the US faced at the beginning of the pandemic in early 2020, yet as I noted with great frustration in a Verdict column at the time, The Washington Post ran a major—and deeply flawed—Sunday piece full of hand-wringing about deficits and debt. Among other things, this means that The Times is hardly alone among the major newspapers in its willingness, even in the least appropriate circumstances, to publish debt porn.
The reason that I took the risk of offering an analogy to my personal finances is that it is important to understand that there are certain truths about borrowing, one of which is that richer entities have very good reasons to take on more debt than poorer ones. Time passed, I became somewhat richer, and I took on somewhat more debt. Time passed, the US economy grew, and our federal government took on more debt. That is the beginning and end of the analogy.
Indeed, taking on additional debt is even more inevitable for a government over time than it is for a person. People do, in some circumstances, pay down debt, mostly because they do not live forever. In the case of the United States, we can be sure that our government will owe more dollars in debt a year from now—and a century from now—than it does today, because that is how government finances should work, as I will explain momentarily.
Even so, The Times found space on its virtual front page last week to offer a piece by reporters Alan Rappeport and Jim Tankersley (hereafter RT) headlined “U.S. National Debt Tops $31 Trillion for First Time.” The opening paragraph (or “lede,” which is supposed to draw in readers) left no doubt about where the piece was going:
America’s gross national debt exceeded $31 trillion for the first time on Tuesday, a grim financial milestone that arrived just as the nation’s long-term fiscal picture has darkened amid rising interest rates.
There is a lot to unpack there, but it is important to understand just how meaningless it is to say that the debt went above $31 trillion for the first time. This is something like saying that, say, the actor Hugh Jackman turned 54 years old for the first time today (October 12, 2022). Well yes, he did, but that would be a strange way to talk about something that runs in only one direction. Do we think that he is going to turn 54 again at some point in the future?
But why is national debt not something that can go down? The answer is that a growing economy and even modest levels of inflation guarantee that any well-run fiscal policy will necessarily involve higher levels of gross debt over time, because trying to decrease debt in such a situation would harm the economy by draining money out of it.
Even Republicans understand this, as their proposals to “reduce the debt” would reduce how much debt rises rather than decreasing absolute levels of debt. They often say that they plan to reduce the debt, but they never make serious proposals to do so. And that is good, because those who argue that we should pay down the debt are in fact arguing that we should destroy the economy to save it.
The short version of the story then, is that although it is technically possible to reduce overall US debt, we should be very glad that it will never go down, because that would harm all of us. So, for the literalists out there: Yes, a person’s age can only go in one direction, whereas the debt could go down if we made terrible decisions. But the fact is that we are never going to see a second time that the debt passes the $31 trillion mark, and that is good.
That does not mean that any level of debt is acceptable, of course. The problem is that absolute levels of debt tell us nothing about what is and is not acceptable.
Although RT do not bother to mention it, when they refer to “gross debt,” they are in fact referring to the least meaningful measure of federal debt available. Gross debt, as opposed to net debt, includes borrowing that the federal government quite literally owes to itself—that is, debt that one federal agency borrowed (as a matter of internal accounting) from another federal agency. The difference is significant: On the first day that the US Treasury measured gross debt above $31 trillion, net debt was $24.3 trillion, almost a seven trillion dollar difference.
Even that, however, is all but a meaningless number. RT do at least spend some time talking about the ratio of debt to GDP, which is the (imperfect) analogy to my saying that my personal high debt is offset by high income—where “high” in both cases is measured against my debt and income levels when I was younger. Looking at debt-to-GDP is at least somewhat meaningful, but again, only if we use the correct measure of debt—and even more importantly, only if we understand why debt is changing.
Although this column is, as I warned above, already chock-full of snark (even by my standards), I cannot help but ask another question about what RT and their editors at The Times were thinking when they decided to run a major story to stoke fears about the debt passing $31 trillion for the first time.
Specifically, why do they care about the number 31? Although I am smirking as I write this, I am genuinely puzzled. The opening sentence of their piece, which I quoted above, refers to this as a “grim financial milestone,” and the very next sentence tells us that “[t]he breach of the threshold … was revealed in a Treasury Department report.”
(Bonus side-snark: Why say that this news was “revealed,” as if there were some conspiracy hiding it before then, when in fact these numbers are reported daily on open public websites? The Treasury’s report “revealed” that the debt exceeded $31 trillion of October 3 in the same way that Major League Baseball revealed that there would be a next round of the playoffs this week. It did, but doing so was merely a matter of course, and everyone saw it coming.)
More to the point, however, when did $31 trillion become a “threshold” or a “milestone” (grim or otherwise) that was worth noting in a major news story? I have been following economic and political discussion about deficits and debt for my entire adult life, and I can say without fear of contradiction that not one person has ever said anything close to this: “Well, don’t forget about that $31 trillion number, cuz that’s a big deal.” This is simply not anything that anyone anticipated or worried about as marking a special moment.
It is just as arbitrary to focus on numbers that end in 0 or 5, but at least that is a common trope for many people. (“My friend just turned the big 4-0 last week.”) When did 31 become an important number for anything? Is it that this happened in October, and October has 31 days—and three of the four letters in the word debt are used to spell October? Are RT fans of a certain ice cream shop? None of this even passes the laugh test.
Religious Fervor and Debt Demonization
Honestly, how could one not have fun in the face of such self-important pontification? There is a certain level of quasi-religious fervor that has found its way into news reporting about federal borrowing matters, and if we do not laugh at it, we might start to take it seriously. Reporters like RT feel comfortable simply assuming that “everyone knows” that federal debt is bad, so much so that they do not even try to justify their use of judgmental, negative descriptors in their story.
Even when they get past their “debt is evil” proselytizing, however, RT do not fare much better. This is in part because they rely on the infamous “deficit scolds” for their money quotes. Paul Krugman popularized that term to refer to lobbying organizations in Washington that masquerade as thinktanks, but which receive their funding from billionaires who are themselves almost evangelical in their passionate attacks on the government. By design, those organizations are go-to sources for journalists on the prowl for quick, condemnatory statements about federal borrowing.
Thus, RT repeat the strange claim from one such scold group “that Mr. Biden’s policies have added nearly $5 trillion to deficits since he took office.” Note that this is a reference to “deficits,” not debt, which means that they are adding up additions to debt over some unspecified period of time. Why does that matter? “That projection includes Mr. Biden’s signature $1.9 trillion economic stimulus bill, a variety of new congressionally approved spending initiatives and a student-loan debt forgiveness plan that is expected to cost taxpayers nearly $400 billion over 30 years.”
What in the world is any of that supposed to mean? Under President Biden, different policies with different time frames have been adopted in response to different needs. One of them, student loan forgiveness (which, as I will argue in an upcoming Verdict column, is long-overdue and entirely too small) has a thirty-year time frame. Others have ten-year horizons, still others a single year. Yet we are supposed to think it means something that the total amount of those programs is five trillion dollars, apparently because five trillion is a big number? How much income will the US economy generate over the next thirty years? Why do people like RT not even ask that question?
To their credit, RT do report that the Biden administration has defended its fiscal policies by highlighting the fact that the annual deficit has gone down over the past two years, “by $350 billion the first year and nearly $1.5 trillion this year,” as Biden himself stated. RT, however, are unmoved: “Those figures obscure the effects of the rescue plan, which was financed entirely with borrowed money.” No, that is simply false. They do not “obscure” the effects of the rescue plan, because—being the aggregate of all borrowing in a given year—those figures include those effects.
Moreover, why is it somehow a negative that the plan was “financed entirely with borrowed money”? That is how rescue plans are supposed to be financed. When the economy is weak and in danger of getting worse, the last thing to do is to finance a rescue plan with more taxes.
And it gets worse:
Much of the deficit reduction Mr. Biden is championing reflects the fact that both he and former President Donald J. Trump signed laws that borrowed heavily in order to mitigate the damage of the pandemic recession. The deficit has fallen in large part because policymakers did not pass another large round of pandemic aid this year.
So the deficit was high in the years that it needed to be high, and now that the economy has recovered, the deficit is lower than it was during the worst of the pandemic-related economic crisis. Again, that is how this works. It is not evidence that Biden is somehow misleading people by pointing to the reduction in annual deficits.
In short, without having explained why debt (in excess of any level, much less the completely arbitrary $31 trillion level that motivates the article) is bad, RT dismiss any attempt to put any of the numbers in context. Well, they say, we’re still trillions of dollars in debt, and it’s going up. And Hugh Jackman is still 54 years old, and he will turn 55 long before he turns 53 again.
Again, I concede that this column has been heavy on the sarcasm. I can only defend myself by asking: Can you blame me? The article assumes its conclusion, relying on benchmarks that give arbitrariness a bad name and that cast everything in a negative light.
There is, however, what could be viewed as a substantive argument hiding inside RT’s morass of misleading prose. Unfortunately, I will show in Part Two that that argument is formulated badly and, even in its most defensible form, relies on an empirical prediction that is almost certainly false.
More importantly, we should not lose sight of the fact that all of this is good news, as I will explain tomorrow. With so much bad news to digest in 2022 America, this is an opportunity to put at least one non-problem in perspective.