Wednesday, January 4, 2012

Conservative Rhetoric About Debt: Is it Hype?

As I listened to the Republican presidential candidates tonight give their speeches following the Iowa Caucus vote, I heard the usual propaganda: windy invocations of fear regarding American debt and declarations that President Barack Obama wants America to become a socialist state. I then recalled Paul Krugman's recent editorial in the New York Times, "Nobody Understands Debt." Fellow writer Steven Hart brought Krugman's piece my attention on Facebook with the comment, "Krugman continues to earn his title as The Last Rational Man on the economy."

What I appreciate about the article is Krugman's clear writing that puts the debt issue in historical perspective with a critique of conservative deficit hawks' disingenuous metaphor for the national debt—the analogy that the country's debt is the same as a family's debt. He says,
"First, families have to pay back their debt. Governments don’t — all they need to do is ensure that debt grows more slowly than their tax base. The debt from World War II was never repaid; it just became increasingly irrelevant as the U.S. economy grew, and with it the income subject to taxation."
I've heard this before, not the part about World War II but the part that explains why the family budget comparison is misleading.

While Krugman admits that we should be concerned about the debt, he also examines the misinformation about America owing debt to foreign governments.
It’s true that foreigners now hold large claims on the United States, including a fair amount of government debt. But every dollar’s worth of foreign claims on America is matched by 89 cents’ worth of U.S. claims on foreigners. And because foreigners tend to put their U.S. investments into safe, low-yield assets, America actually earns more from its assets abroad than it pays to foreign investors. If your image is of a nation that’s already deep in hock to the Chinese, you’ve been misinformed. Nor are we heading rapidly in that direction.
Do you remember that political ad that conservatives ran during the midterms? I've embedded it here in case anyone's forgotten it because I remember seeing it in 2010 and thinking that it was some of the slickest fear-mongering around.

Also, as I read Krugman's commentary about America's "rabidly antitax conservative movement," I nodded my head. As I've written before, the way some conservatives are so adamantly against any increase in taxes begs deeper investigation. People aren't asking often enough if what anti-tax conservatives say is factual. For instance, frequently Tea Party conservatives rely on the Boston Tea Party image to conflate in the public mind that original protest against taxes without representation with their current ideology that all taxes are bad and the government is evil. I continue to think that some of them want to break the government and shift all public funds and services to the private sector. That is a form of income redistribution, a way of taking the people's money that provides services for the have-littles and the have-nots and moving it disproportionately to the haves.

Think of how overtime services that used to be provided by city governments have shifted to private companies as a city's tax base shrinks. As a government loses revenue but the people still require services such as trash collection and access to clean water, who begins to provide these services, and what are the potential outcomes of having necessities that impact public health only provided by private companies? Why progressives don't frame conservatives' anti-tax rhetoric in terms of shifting public wealth to the private sector, I don't know.

If you'd like some clarity on the matter of the debt or to read something that helps you put the issue into a reasonable perspective, I recommend you read Krugman's editorial.

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