8 Facts That Prove Our Govt. Is Not Going Broke
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Pete Peterson, the billionaire former private equity mogul, is quietly funding a noisy bus tour to whip up debt hysteria across the land. The “Ten Million a Minute Tour” headed by the Peterson Foundation’s former CEO, David M. Walker (and featuring such economic soothsayers as Alan Greenspan and Ross Perot) will end this week in Washington, DC after traveling coast to coast to alert America about the myriad of alleged dangers posed by government debt and deficits.
Really, it should be called the “Million an Hour” cavalcade because that’s about how much Peterson and company made, in part, through obscene tax loopholes designed for private equity firms and hedge funds. If there really is a debt problem, then Peterson and his fellow tax-evading financial moguls have contributed mightily to it.
But America does not face a debt crisis. Nor are we likely to face one in the next 100 years. In fact, we are the last country on Earth that needs to worry about its public debt.
What’s really behind the debt histrionics is a relentless effort by these Very Important People to use a trumped-up crisis to shred the social safety net and bring forth their bleak vision of a dog-eat-dog society where government provides for no one (except the super-rich). Unfortunately, many liberals are also buying into a “debt crisis” that doesn’t exist.
It’s time to inoculate ourselves from deficit hysteria. The first step is recognizing that virtually everything we read and hear about government debt and deficits is misleading, manipulative or just plain wrong. So, here’s your handy guide to the eight biggest lies.
But first, some basic definitions and facts:
Deficits are how much the government budget goes into the red in a given year. The red ink is covered by the sale of government bonds to investors here and abroad.
The national debt is the total amount of what the U.S. owes on those government bonds. If we have deficits year after year, then the debt gets larger year after year.
The projected deficit for this fiscal year is over $1 trillion.
Our total government debt is more than $16 trillion as of Oct. 1, 2012.
1. Isn’t it extremely dangerous to have such a large government debt?
Supposedly, the danger point comes when investors no longer will buy our debt at reasonable interest rates because they fear we won’t pay it back. Are we there yet? Are we getting close?
Let’s start with a look at debt as a percentage of our nation’s annual economic activity (gross domestic product or GDP). The chart below shows our national debt as a percentage of GDP hit an all-time high of 121 percent during the depths of World War II and recently began sharply rising again in the aftermath of the Wall Street crash. In 2011 the debt/GDP percentage reached 102.9 percent. Most forecasts suggest it is now leveling off.
We can also compare ourselves to other large economies. Here’s a list from the International Monetary Fund.
Government Debt as a Percentage of GDP, 2011
What’s going on here? First off, China’s percentage is artificially low because it buries a good deal of public debt in opaque provincial and local government loans and land giveaways. And then you have Japan. Why isn’t everyone screaming about Japan’s debt? Because investors consider its economy to be strong, steady and safe. They’re happy to lend to Japan at very low interest rates. And where is the safest haven in the world? Here in the USA. Investors are willing to lend us money at almost no interest rate at all.