Back to NewsThe National Debt Low-Down: Should We Care?
THE GIST
NO!!! In the context that they speak of and weaponize national debt, it is not an issue that we should allow politicians to trick us into caring about. It’s another scare tactic used by both sides to harvest our attention and our money…and that’s all it is. Most indications point to the probability that the loudest voices in the national debt scream-off don’t fully understand its complexities themselves¹.
WHAT ARE THE BROAD STROKES?
First, we need to understand that both parties play their own role in the debt drama. They do this with the intention of keeping you glued to the news and angry with the other side, in hopes that it will keep your donations flowing. When in power, the GOP historically drives up the national debt and then points the finger at Dems when they regain control. But most Dems are also a part of the misinformation campaign aimed at keeping partisanship intact. How? While they like to pat themselves on the back for lower spending, they don’t explain that often the economy is actually healthier (depending on a very large, intricate web of circumstances) when government spending is high.
The result is what we, the voters, see play out every year- a pointless, expensive, dramatic charade about who’s to blame for federal spending, without either side telling us the simple truth: the role the national debt plays in a healthy American (and global) economy is far, far too complex to be summed up in terms of “high=bad, low=good.” In a dialog with Unite Us about the points made here, former Senior Vice President of the Federal Reserve Bank of St. Louis, David Andolfatto, said “[The national debt] is indeed a complicated subject, and it is important for people to approach the issue with an open and sober mind.”
WHAT DOES THIS MEAN FOR US?
-Well, if you care to get into national debt nitty-gritty, there are some explanations and resources for you below, and part two of this segment explains why the question of “how much is too much” still doesn’t change anything for you, the American voter. But the bottom line is this- the most patriotic reaction you can have to politicians ranting about the debt ceiling is to tune them out and tell them that you and your fellow Americans (from all parties) don’t want to hear it anymore!!
WHAT SHOULD WE BE PAYING ATTENTION TO IN REGARDS TO “NATIONAL DEBT”?
The fact that a large part of what funds our government (and therefore a PART of the “national debt” puzzle) are tax dollars, and over the past 80 years the rich have paid less and less of their fair share.
During the Eisenhower presidency, the rich paid 90% in base taxes, averaging 50% after deductions. As corporate lobbying and money in politics increased through the following decades, the rich have managed to bribe congress into lowering their tax rate to 23% in 2018. That’s right- the 400 richest people in America now pay lower taxes than the middle class. In the first year after the 2017 tax cuts, corporate America paid 90 billion less in taxes, which was 80% of the national debt increase that year.
To make matters worse, federal interest payments on debt hit a record last year of 475 billion, most of which was paid to those same 400 wealthiest Americans on their treasury bonds. So folks, while during the ‘50’s and ‘60’s (what we like to think of as the glory days of the middle class) the taxes of the richest Americans used to do what they are supposed to in a healthy democracy: help fund government. Now, due to decades of lobbying and campaign funding, your tax dollars fund government AND pay interest to the rich on money they made by not paying their share in taxes. Sound bonkers? That’s cause it is!!
And it needs to change. That change starts with you- with us, as we demand that congress get money out of politics! Join Unite Us, tell a friend. Let us do the heavy lifting of cutting through the noise to keep all concerned Americans informed of what to pay attention to, and what to tune out.
SOME NITTY-GRITTY
The first fact to keep in mind, and maybe the most important indicator of how loony congress’s national debt theater really is, is that the world’s most brilliant economists (who are also some of the world’s most brilliant minds) spend their entire careers studying and debating the interplay between various aspects of economies small, large, and global. If the function of national debt were as simple as “high=bad, low=good, as politicians would have you believe, this would not be the case.
Economists are usually the first to admit that there is no perfect recipe, and that everything is always in flux. As changes occur in national and global markets, products (both financial and material), trade, political alliances, and ways of life alongside un-forecasted developments such as war, famine, pandemics etc., so does the interplay of economic tools and tactics. Running a low national debt may result in a slow, depressed economy at one point in time, and more wealth and stability in others. The same is of course true of running a high national debt.
It is absolutely illogical to try to understand the function and health of the national debt through a comparison to common household debt, which is what most politicians try to do in order to keep you glued to the news. One major reason is that…households don’t literally print money (not without going to prison anyway). The U.S. government does.
As the U.S. dollar is the world’s main reserve currency, how many dollars in circulation does have a role to play in what economists call a balanced economy, but it is only one part in a massive and complex system including inflation, interest rates, employment rates, GDP, migration and immigration, appropriations (what the government plans to spend money on), debts owed or promised between institutions, public perception, natural resource policy, and tax policy, to barely scratch the surface.
Because the federal government is largely in control of these moving parts, it is theoretically possible to pay off what we inaccurately call “national debt” with new “debt” to the end of time without ever damaging the economy. That is unlikely to be how things unfold, but the point here is to understand that how much “debt” the federal government takes on (and in what form) is actually an elaborate juggling of assets, predictions and gambles that is far more complex than the simple fact that you have to pay X dollars on your mortgage this month or lose your house.
Below are some additional resources. The first, Does The National Debt Matter?, by former Senior Vice President of the Federal Reserve Bank of St. Louis, David Andolfatto, is an excellent one stop intro into the complexities surrounding the true nature of nation debt.
https://qz.com/2121442/no-the-us-does-not-have-30-trillion-in-debt
https://prospect.org/power/republicans-proved-deficits-matter/
¹In a recent interview with the New York Times, Representative Tim Burchett of Tennessee spoke of his concerns for the national debt as a factor in his voting to oust former speaker Kevin McCarthy. In this interview, Burchett shares rare and admirable bipartisan considerations, but hints at the probability that he and his staff either do not fully understand the complexities of the national debt and debt ceiling, or have chosen to ignore them for political convenience. https://www.nytimes.com/2023/10/06/podcasts/the-daily/mccarthy-burchett-republican.html?