Should We Care?
Wait, Should We Care at All About the National Debt?
Back in 2009, with the country dropping into a devastating recession, President Barack Obama signed a stimulus package intended to revive the shaky economy at a cost of around $831 billion over ten years. Only a few Republicans voted for it, and the GOP spent the next seven years decrying the Democrats’ profligate ways—a sentiment that became central to the new Tea Party movement and the rise of a new crop of hard-right GOP leaders.
Now Republicans are on their way to finalizing a tax cut bill that—in the version passed by the Senate early Saturday morning—would add $1 trillion to the national debt over the next ten years, according to the nonpartisan Joint Commission on Taxation. That had many progressives crying hypocrisy, but it was far from surprising.
“Lots of people don’t worry about debt when they want a policy,” Maya MacGuineas, president of the Committee for a Responsible Federal Budget, told me.
On the face of it, digging the country deeper into debt feels like a dangerous idea—an irresponsible choice on a par with running up your personal credit card to take that Bahamas cruise. But the federal government’s debt is a lot different than your personal finance. Nearly all economists agree that it’s sometimes a good, responsible idea for the government to borrow money. The question is when and how to use borrowing as a tool to keep the economy running smoothly.
“In my view the trouble isn’t that we’re adding to the debt, it’s what we’re adding it for,” said Dean Baker, co-director of the Center for Economic and Policy Research.
Baker said the Republican bill’s tax cuts for the wealthy would only make the crucial economic problem of inequality worse. And features like taxing graduate students’ tuition waivers as income, which is likely to discourage young people from continuing their education, could hurt economic growth in the long term.
But, he added, increasing the national debt isn’t particularly scary. It’s true, Baker said, that in recent years the US federal debt has grown bigger than the country’s gross domestic product—something that hadn’t happened since the end of World War II. (The debt, the total amount the government owes to its creditors, is different from the deficit, which is the difference between how much the government spends and how much it raises in any given year.) But, because interest rates on government bonds remain quite low, the US is still paying a lot less each year in interest than it was in the 1990s.