Stop Freaking Out About the Debt! 5 Reasons There Is No Debt Crisis
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In fact, if that slowdown becomes the new norm, Medicare spending will stay essentially flat as a share of the economy from here on out. That doesn’t show up in CBO’s long-term projections because their methodology uses cost growth over the last two decades to predict future trends. ( See page 60.) It’s literally within the realm of reasonable possibility that the long-term debt problem is already solved — all without lawmakers having to cut a dime.
5. We don’t know how much debt actually causes crisis: Ryan and others often citea finding that economic growth slows as debt-to-GDP reaches 90 percent. But there’s a big correlation-causation problem with this. Remember the denominator: slowing GDP, regardless of debt, could raise debt-to-GDP just as much as higher debt could. And the countries that fit with the 90 percent threshold prediction also present an apples-to-oranges problem when compared to America. Britain, Japan, and France — advanced democracies like ours, with their own currency — shouldered debt levels far in excess of 90 precent over extended periods of time in the past. No debt crisis arrived.
In conclusion: the “debt crisis” is a mere phantom — only one of many possible futures, and far from a certainty. The interest America is paying on its debt is currently lowerthan it was in the 1990s, despite a lower debt-to-GDP ratio then. When inflation is factored in, current real interest rates on our debt are negative. Financial markets are willing to pay us to borrow from them.
Meanwhile, every dollar we cut — nay, every dollar we fail to borrow — is a dollar that isn’t going to shore up the safety net, to rebuild the country’s infrastructure, or to support struggling Americans while their livelihoods remain on the line. That we’re passing on this opportunity to repair our country, much less even considering the monstrosity that is the Ryan budget, really is absurd.