Does the debt really matter? Mainstream coverage about the topic suggests most reporters are more interested in hypocrisy about the debt than the debt itself.
At the Atlantic, Annie Lowrey’s piece entitled “Why Don’t Republicans Fret About the Debt Anymore?” criticizes President Trump for not including this “once-standard GOP talking point” in his most recent State of the Union speech.
Meanwhile, Pat Garofalo at NBCnews.com calls out GOP hypocrisy on the debt, noting that “[C]ongressional Republicans who did nothing but complain about the deficit and debt under former President Barack Obama have proven themselves to be hypocrites by casting their fiscal concerns aside now that someone with an R after his name is in the White House.”
Garofalo adds that “Trump knows what too many Democrats don’t: Voters don’t care about the federal deficit.”
This media narrative makes for an interesting story but it says nothing about the underlying issue. And it’s worth noting some would argue Democrats still don’t care about the debt but because that doesn’t represent a shift it is not a story. Hypocrisy may be a vice but persistent and consistent indifference is no virtue.
The media’s hypocrisy bias doesn’t shed much light on the real question, and it hides the fact that Americans are rightly concerned and want Congress to act. According to the Peter G. Peterson Foundation, “The majority of younger Americans (aged 18 to 35) – who will inherit the debt – also believe the issue should be a top priority (68 percent).”
The Peterson Foundation recently published its own top ten reasons why the debt matters but the arguments boil down to two key points:
First, the debt poses a potentially catastrophic risk to our country.
In 2010, Admiral Mike Mullen, Chairman of the Joint Chiefs of Staff under President Obama made an extraordinary statement when he said, “Our national debt is our biggest national security threat.”
This was not a right-wing economist or armchair alarmist spinning tales. Mullen was our nation’s top military officer at the time. Think about the gravity of that statement. Mullen said the greatest threat facing the country wasn’t terrorism or nuclear war but our debt. That’s extraordinary.
Still, the debt may be the least fascinating and sensational potential crises the media covers and is, therefore, poorly understood. Much more attention is given to the Yellowstone super volcano, killer AI, climate change, potential asteroid strikes, and so on. Yet, a debt crisis is more likely and far more imminent threat than any of these scenarios.
Economist Peter Schiff recently predicted a major economic downturn by 2020. He said, “We won’t be able to call it a recession, it’s going to be worse than the Great Depression. The US economy is in so much worse shape than it was a decade ago.”
Some argue that global markets and investors have already evaluated the risks associated with America’s huge national debt and are not alarmed. They may well be correct. But these same markets didn’t view toxic real estate assets to be a threat in 2006 and they were tragically wrong.
Economists Carmen Reinhart and Kenneth Rogoff wrote a landmark book after the financial crisis of 2007-2008 called “This Time is Different: Eight Centuries of Fiscal Folly” that described how overconfidence leads to fiscal blindness. Reinhart and Rogoff point to 66 countries in five continents across eight centuries who paid a price for living beyond their means. This time probably is not different.
The second reason the debt matters is that it materially reduces standards of living.
Debt can trigger a sudden crisis or it can create a gradual crisis of missed opportunity. The Peterson Foundation shows that debt can reduce incomes for the next generation of American families by $16,000.
Another factor that hurts standards of living are the interest cost of the debt. Paying interest costs essentially diverts capital that could be used to create jobs to an ongoing bailout fund for politicians who don’t want to take the political risks necessary to tackle our debt problem. Meanwhile, Congress’ failure to tackle our debt puts future generations at risk of huge tax increases to pay for these unfunded obligations, which could exceed $210 trillion or ten times the size of our current total debt.
In a country governed by real world economic forces, debt is not an imaginary force. It has brought nations’ to their knees in the past and can do so again. Hypocrisy is the easy way to write about the topic but the risks of the actual debt are grave.