A remark on the national debt

I’d like to briefly note the error most folk make when they say the deficit is bad. It’s an assumption of a zero sum situation.

It’s an assumption that the dollars are fixed – that we’re “borrowing against our future” and that our future will be pretty much the same as now.

It’s a restatement of… ok, it’s got a few fancy names, but I’ll use mercantilism. And it’s wrong.

Grossly simplifying, it says that nothing is worth more than the value of its components. That jewelry you own? It isn’t “really” worth more than the value of the gold and other materials of which it’s made.

Presented that way, the flaw is apparent.

It also ignores the concept of borrowing to seed — something common to pretty much every business in existence. You don’t start with all your wealth, or Apple would still be a couple of guys in a garage. You borrow so you can do things that will create value.

The trick at the national level is that the nation doesn’t have to borrow from outside lenders. It borrows against its future, under the belief its growth will be sufficient to more than pay that loan back.

There is much gnashing of teeth over the fact our total debt is about the same as our total GDP. “How shall we pay for it all” goes the complaint. Well, we have 20-30 years to do so, and our historical and expected growth averages about 4% per year even with the regular payment plan we use. And yes, we pay part of it off all the time.

Is it getting worrisomely large? yes. Is it a crippling thing that needs all our wealth and focus? no.

Because it’s not a zero sum game.


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