We’ve all seen this photo before. And we’ve all heard the rhetoric before. Just this morning I heard a radio ad about how my incumbent senator “has a spending problem” and is–dun Dun DUN!–“sticking my grandchildren with our debt!”
You hear about the national debt every election cycle. And I don’t think that’s a coincidence. Because the national debt is merely a rhetorical tool. Politicians paint the national debt as a pretty dire situation. I mean, look at the clock in the picture. It gives an amount owed per family. That number is huge and growing. It all looks scary. And politicians use it to scare us into electing them.
But the national debt is different than other debt. It’s not bad debt. The actual amount of debt that we’re in is inconsequential as well (To a point. More on this later). When the US credit rating was downgraded a little while back, it wasn’t because of the amount that we owed. It was because, thanks to political grandstanding and brinksmanship, our ability to pay it back was in question. And that’s what makes the national debt different than other debt: the fact that it’s owed by a nation.
Why is debt bad for everyday people like you and me? In a nutshell, it’s because eventually you and I would like to retire, which means we’d essentially be living off of whatever we had saved up during the course of our lives. And living off of that would be pretty hard if that was a negative number thanks to debt. But guess what? Countries don’t retire.
As long as the US can make payments, debt is no big deal. That’s not carte blanche to run up debt endlessly, of course. There’s always a limit to how much debt is too much debt. But there’s the rub. There is no such magic number. What is considered “too much money” is entirely determined by the countries that lend us the money.
It always cracks me up when I see things like that picture with the amount owed per family. What do people think? That someday, randomly, someone is going knock on their door to demand $70,000 in one lump sum? Get real. That’s never going to happen. And it doesn’t need to happen. When you and I have to pay off a debt, we only have one lifetime to do it. But the US theoretically has forever to do it. And other countries theoretically have forever to collect it. Nobody is going to ask us to pay off 10 trillion dollars tomorrow. Because we have the ability as nation to pay it off gradually over the next 200 years. So long as our lenders and creditors feel we can pay it back. And by the way, did you know that we’re still paying off debt from WW2? So instead of talking about imaginary grandchildren that don’t exist yet, it would make more sense for politicians to point fingers at their own parents, “the greatest generation.” But that doesn’t win votes.
Of course this isn’t an argument for endless spending. Debt, regardless of its severity, does have implications for us. But it’s not a ticking time bomb or a house of cards waiting to collapse and crush us all. What matters is the debt in relation to the size of our economy. And that isn’t an argument for running up annual deficits, either. A budgetary surplus would allow us to reinvest in ourselves. Because regardless of whether we run a deficit or surplus, we still make payments on our debt. Because even when we run a deficit, we’re still making and taking in money.
Running a surplus would be great and our politicians should still aim for that. States could certainly use the money. We could raise taxes or cut expenditures or both (I’m in favor of both). But this idea that our debt is crippling is mostly manufactured by politicians who want to win an election.