National Debt: Let's Add Some Sense to the Debate (essay)

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1

I heard one of the new Congressmen say recently, "We don't have a revenue problem.  We have a spending problem!"  He was very certain about that.  I have heard other national leaders interviewed saying much the same thing, just as emphatically.


What I have not heard is on what basis this firm conviction is grounded.

2

It is true that we have a national debt of a size that is very rare for our country.  As a percentage of the U. S. Gross Domestic Product, our current debt is even higher than the national debts of many other developed countries such as Germany or Sweden.  Our normal, or expected level of national debt - it may be worth remembering - is quite a bit lower than those planned in other developed countries.

The size of our current debt could be a problem under certain circumstances, such as a reasonable chance of domestic inflation or international fear for the stability of the U. S. economy when compared with the economic stability of other developed nations. 

Neither of these circumstances faces us today.  The U. S. economy is still the largest and most trusted in the world, even though the worldwide Great Recession has caused significant economic problems here as in other countries. 

And far from there being reasonable fear of inflation in our country, it is generally agreed that we have only recently escaped the danger of deflation, falling prices rather than falling value in the dollar.  In other words, the probability of the opposite of inflation - as far as we can tell - is greater than the likelihood of inflation.

Still, since either condition could possibly become a reality at some time in the future, it is prudent to keep the amount we add to the current national debt as small as possible.

3

Additions to the national debt occur when current government spending exceeds government revenues.  In a controlled capitalistic economy such as our own, government revenues come from federal taxes, not from corporations owned by the government. 

Adjusted for normal inflation over the years, our government's revenues today are considerably lower than they have been in the past because of the many reductions in federal taxes over the last 30 years.  Tax revenues have fallen especially because of the reduction of taxes on the wealthy, since the wealthy have been counted on to pay the largest share of federal taxes for 100 years or so, as they do in the other developed countries.  Such taxing is also a basic feature of modern capitalism.

And, most obviously, our tax revenues are significantly lower in 2011 because of the Great Recession of 2008-2010, from which we have just begun to recover.  The long-term unemployed pay little income tax, if any.  Businesses earning fewer dollars than in the recent past pay less tax too; those that are bankrupt may pay none. 

Even adjusted for inflation, government spending today is half the percentage of GDP of what it was in 1946.  It is below its level of the mid-1950s, a period cited as highly prosperous for our country.  The level of national debt today is comparable to what it was 20 years ago. 

The level of the national debt clearly is not a matter of urgent concern, especially when compared to the high rate of unemployment and the stagnant or falling income of 75% or 80% of Americans.

4

There may be some spending problems that need to be addressed.  However, the national debt is less a cause for worry than the fragile condition of the economy or the injustice of the current tax system.


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