Check out this book review

Ever since George Washington became the first president of the United States, politicians, economists, bankers, philosophers and citizens without titles have been arguing about the deficit and the national debt.

"White House Burning: The Founding Fathers, Our National Debt, and Why It Matters to You" by Simon Johnson and James Kwak;

 

The issue has been whether the nation should avoid deficit spending, engage in deficit spending and, if engaging, how much national debt is too much.

Frequently, the opponents have likened the national debt to a family's debt, turning an issue about running a vast country into a moral set piece about the rightness or wrongness of Mom and Dad spending more than they earn.

Now come professors Simon Johnson and James Kwak to tell everybody that the national debt/family debt conversation is a false analogy, and to shatter dozens of additional myths about deficit spending.

Johnson teaches at the Massachusetts Institute of Technology and is a former chief economist at the International Monetary Fund. Kwak teaches at the University of Connecticut. They were co-authors of the controversial book Thirteen Bankers: The Wall Street Takeover and the Next Financial Meltdown.

Any discussion of the national debt should begin with an obvious yet apparently forgotten fact in mind: The national debt matters only because the government — and thus its citizens — must pay interest on the borrowed money. But the fact of a debt itself is unremarkable, and the amount of that debt matters only because the amount of interest expense rises as the debt increases.

An evidence-based discussion will also take into account that as a percentage of gross domestic product, U.S. government spending is low compared with other nations with advanced economies.

Johnson and Kwak thankfully dispel the widespread notion that a national debt totaling trillions of dollars means the government is too big. As government spending ratchets up, conservatives argue that government influence over the private sector increases, too, stifling economic growth and impinging on personal liberties. Wrong, say Johnson and Kwak, for at least three reasons:

•Total government spending does not accurately measure the size or impact of government. For example, the Environmental Protection Agency can issue a new rule about factory smokestack emissions that leads to no new government spending, yet will have an impact on the operation of factories.

•Government spending does not always, or even usually, reduce individual liberty. Freedom from want is an important kind of freedom. Government programs such as Social Security and Medicare frequently allow individuals the additional freedom that arrives with improved health and adequate retirement income.

•Shifting responsibility from government to the private sector to reduce the federal budget is not always beneficial. If a government agency that predicts tornadoes and alerts communities in the path of the tornado is eliminated because of budget cuts, what happens when no private-sector company enters the business? Or perhaps a private company tries to fill the void, but performs poorly with no recourse for individuals who reside in tornado alleys.

The takeaway message from Johnson and Kwak is this: The national debt is ultimately not an economic issue, but rather a political issue, which, they say, "is why solving the long-term deficit problem seems so hard. Today, Republicans are dug in against tax increases and are demanding benefit cuts in the name of fiscal discipline." Democrats, on the other hand, "have shown the willingness to combine tax increases with benefit cuts, but are adamantly opposed to a solution that only includes benefit cuts. As long as this political stalemate continues, the national debt will continue to grow."

Weinberg is an investigative reporter based in Columbia, Mo., and the author of eight non-fiction books.

Comments

Shattering myths

Interesting and insightful review. I applaud anything that helps to refute Republican mythology.

On-line Village News readers regularly miss out on features (e.g., comics, puzzles, obituaries, etc.) enjoyed only by readers of the print version. Now the tables are turned a bit: too bad readers of the print version will miss this excellent feature.