A group called “Being Liberal” posted the following graph to Facebook purporting showing how deficit as a proportion of GDP has fallen from 10% to 4%. The caption implies two things:
1) most Americans are simply ignorant if they think that there is a borrowing or debt problem
2) the deficit is falling (the caption is at odds with what the graph actually shows)
I actually started to pull together the data on deficit and GDP until I spotted the other sleight of hand. The graph uses projections for the key years in which the deficit/GDP ratio is claimed to go down. These are not “data” points, but politically-motivated numbers. Do you remember around 1999 and 2000 when they projected such large surpluses that the national debt would be paid off?
In a comment, I pointed this out. One “liberal” argued that if I really cared about what was good for the country, then I would have to admit that the deficit fight is just theater and that “liquidity” is good for jobs. I wrote the following in response to that, and thought it would be worthwhile to post for a larger audience.
If you cared about what was best for the country, you would not have a central bank centrally planning money and credit. The reasons why central planning doesn’t work are by now well known to anyone who cares.
If you cared about what was best for the country, you would not issue counterfeit credit (where the borrower has neither the intent nor the means to ever repay it), use this to fuel malinvestment and consumption and call this “growth”.
If you cared about what was best for the country, you would not design a monetary system based on a unit of irredeemable debt that with no mechanism to ever extinguish a debt, and in which debt has to rise exponentially.
If you cared, you would look at marginal productivity of debt rather than debt or debt/GDP. Marginal productivity of debt is how much you add to GDP for each fresh new dollar you borrow. Marginal productivity of debt has been in secular decline since at least the 1950’s. (and you would not define GDP as production + destruction)
If you cared, you would not smugly ignore the cries of the saver (including pension fund) as your zero-interest-rate policy crushes him.
If you cared, you would not shut your eyes to the *falling* (as opposed to low) interest rate that has been going down for 32 years so far. A falling interest rate destroys capital in a most pernicious way.
What is ironic is that both sides of this false dichotomy–Democrats and Republicans–are able to spot fallacious arguments when used by the other side and curiously become blind or even enthusiastic supporters of the SAME FALLACIES when used to advance their “side”.
No one really believes that they can borrow forever and create “growth”, “wealth”, “prosperity” or anything good. But it has a cash value, hasn’t it? Borrowing forever (or at least while you can get away with it) allows you to finance your vote-buying schemes.
You may be able to get away with vote buying (until you destroy your irredeemable paper currency), but you are no longer able to claim that this is about “caring” for what’s best.