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What the GOP and Corporate Media Are Hiding: The Public Debt Is Putting More Cash in Your Pocket

The media is hoodwinking us into buying the Right's deficit hysteria -- they're not telling us the real story.

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And while the media's focus on the deficit has increased dramatically in recent years, this is nothing new. Conservatives have spent the last 30 years pushing all manner of  distortions about taxes, spending and the national debt – the stuff lies at the heart of their “supply-side” economic pablum.

An exchange at a town-hall style debate way back during the 1992 presidential campaign spoke to the cumulative effect of that mendacity. A woman in the audience asked the three candidates – Bill Clinton, the senior George Bush and Ross Perot – how “the national debt personally affected each of your lives?” The question famously stumped Bush, who said, “I'm not sure I get it. Help me with the question and I'll try to answer it.” But the exchange also prompted political scientist Jonathan Bernstein to posit that many Americans, “have no idea that 'deficit' refers to the difference between federal government revenues and federal government expenditures, but instead use it as a synonym for 'bad things in the economy.'"

So what is the debt's impact on ordinary people? A truth rarely spoken in the corporate media is this: any way you slice it, adding a dollar of public debt puts a dollar into the pockets of American households.

Let me repeat that: There is a 1:1 ratio between adding public debt and private wealth, any way you want to look at it. If we had paid enough taxes to cover the services we enjoy, we wouldn't have any debt, but we would have less money. As conservatives always point out, a dollar in taxes is a dollar less in our pockets.

Similarly, if we cut public services, we'd save the government some money, but people would have to pay for the things it provides out of their own pockets. Consider the GOP's Medicare plan for example. As the L.A. Times noted, “even as the federal government cut its own spending, seniors would end up paying almost twice as much out of their own pockets — or more than $12,510 a year, the CBO estimates.” The same is true for subsidized student loans – we could cut them, saving some public dollars, and every one of them would be added to graduate student loan debt (two-thirds of college grads now leave school with an average debt of $24,000). We could cut programs for the poor, which would save public money, while making them poorer.

That's true of virtually everything under the sun, including spending conservatives tend to like and progressives usually hate– killing a dollar in corporate subsidies also kills a dollar in corporate profits; a buck less in military spending is also one less greenback for defense contractors and soldiers.

Now, it's true that more debt requires higher interest payments, but here again we have a 1:1 ratio. If our household debt was higher as a result of paying more out-of-pocket, then we'd have to pay more interest as well. The only difference is that with public debt, the interest burden gets spread over our entire society – including rich people like Pete Peterson – instead of only bankrupting those among us who have fallen on hard times or had a string of bad luck.

This gets to the crux of the progressive argument. The number one reason we're seeing elevated deficits right now is the recession itself. In a consumer-based economy, the way to decrease those deficits is to grow one's way out, which isn't going to happen by taking money out of Americans' pockets while demand is still in the hole.