04 January 2015

The Problem with Government Debt (Part I)

Recently, I rummaged around the web trying to learn what the concrete problems are with government debt.  The first thing I ran across was this.  The Heritage Foundation offers us 17 reasons why we have a "big bad" debt.  The article perhaps offers a lesson in poor communication skills.  Let's look at the 17 reasons one by one.

1)  $53,769 – Your share of the national debt.  "every American will be on the hook for this massive debt burden"
Well, not really.  We don't all pay equal taxes.  As Romney pointed out, 40-some-odd percent of us don't pay taxes at all.  And so the point here is that debt is bad because it has to be paid back?
Result: inaccurate reason.

2. Personal income will be lower.
This point references a couple of papers suggesting that high debt slows economic growth:
Kumar and Woo, July 2010
Cecchetti, Mohanty, and Zampolli, September 2011

These papers are rebutted by numerous economists.  Panizza and Presbitero (2012) provide various references.
Result: debunked reason.

3. Fewer jobs and lower salaries. High government spending with no accountability eliminates opportunities for career advancement, paralyzes job creation, and lowers wages and salaries.
This is an argument about high government spending, not debt.  High government spending might help to cause debt, but debt does not cause high government spending.
Result: Non-sequitur.

4. Higher interest rates.
An interesting argument, except that interest rates are currently historically low.  Perhaps high debt when interest rates are low, implying that capital is idle, is not a problem.  Perhaps high interest rates are the problem.
Result: debunked reason.

5. High debt and high spending won’t help the economy.
Lack of help is not evidence of harm.
Result: Non-sequitur.

6. What economic growth?
This reason is essentially the same as #2.  A paper by Reinhart, Reinhart, and Rogoff is referenced that is rebutted by Panizza and Presbitero above.
Result: Repetitive reason.

7. Eventually, someone has to pay ... and Washington has nominated your family.
This reason is the same as #1.
Result: Repetitive reason.

8. Jeopardizes the stability of Medicare, Social Security, and Medicaid.
The argument here is circular.  In order to prevent high debt from destabilizing safety nets, we must destabilize safety nets.
This argument also assumes the premise.  If high debt is not harmful, then there is no harm to letting safety nets increase the size of the debt.  This reason can only show that high debt is harmful if it has been previously shown that high debt is harmful.
Result: Circular reasoning.

9. Washington collects a lot, and then spends a ton
This argument is the same as #3.  It says that high spending is bad, and does not explain why high debt is bad.
Result: Non-sequitur.

10. Young people face a diminished future.
This is the same as #2 or maybe #3.
Result: Repetitive reason.

11. Without cutting spending and reducing the debt, big-government corruption and special interests only get bigger.
This argument repeats #3, but adds to it the unsubstantiated claim that government (or perhaps just "big-government") is corrupt and implies that special interests (e.g. senior citizens) are bad.  Whether or not government is axiomatically corrupt and special interests are axiomatically evil is worth discussion; but they are problems unto themselves and not reasons why high debt is bad.
Result: Repetitive reason.

12. Harmful effects are permanent.
Circular reasoning:  We have to show that high debt is harmful in order to show that high debt is permanently harmful.  Also, poorly argued.  If harmful effects are permanent, then reducing the debt cannot reduce those harmful effects.  If the effects can be cured, then they are not permanent.  Also, repeats #2.
Result: Repetitive, circular, non-sensical reason.

13. The biggest threat to U.S. security.
This is again circular reasoning.  We have to show that high debt is a problem in order to show that high debt is the biggest thread to U.S. security.
Result: Circular reasoning.

14. Makes us more vulnerable to the next economic crisis.
Yet another example of circular reasoning.  This argues that we should not go into debt during an economic crisis because it will hinder us from going into debt during an economic crisis.  Also, the premise of this argument contradicts the conclusion.  The argument assumes that going into debt during an economic crisis is helpful.
Result: Circular, contradictory reasoning.

15. Washington racked up $300 billion in more debt in less than four months.
That's an interesting factoid, but it's not a reason why high debt is a problem.
Result: Non-sequitur.

16. High debt makes America weaker.
This appears to be another circular argument.  Apparently high spending on the military is racking up high debts that will force us to cut spending on the military.  Perhaps America should stop trying to be the world's lone policeman and start working with other countries to share the burden.  Perhaps America should cut military spending and invest in infrastructure to increase our growth rate so that we can spend absolutely more money on defense but a smaller percentage of our income.
Result: Circular reasoning.

17. High debt crowds out the valuable functions of government.  By disregarding the limits on government in the Constitution, Congress thwarts the foundation of our freedoms.
This appears to be another argument that high spending, not high debt, is bad.
Result: Repetitive reason.


Anyway, it would be nice to see stronger reasoning, logic, and communication skills from organizations like the Heritage Foundation.  If you title an article "What Are the Real Problems with the National Debt?" it would be nice if the article stayed on topic.  If you want to talk about problems with high government spending, you might title your article "What are the Real Problems with Government Spending?"


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