JJohn Oliver took a perennial stance in American politics on Sunday night: the US national debt, also known as “the most boring $ 28 trillion in the world,” joked. Debt has been “a complete obsession in this country” – just look at New York’s ever-increasing debt clock – and while it is “undeniably large” and ready to expand with the trillions of coronavirus stimulus packages and plans of infrastructure revealed by Joe Biden last week, the debt is not as ominous as conservative fear creators would have people believe.
“For decades in political announcements, the debt has been portrayed as a burden that we place on future generations,” explained the presenter from last week. The general argument is that the federal government is “running out of credit cards and that one day the bill will expire” and runs over the younger generations, usually represented in advertisements by crying babies and exhausted children.
These ads, especially those that suggest the debt is to China, are “extremely misleading,” said Oliver, since most of the public debt is owned by American investors.
And “although debt is often spoken of as something we are accumulating with new spending, the truth is that, before the pandemic hit, most of our debt was the result of long and steady growth in programs to which we have long been committed. time, like Medicare and other rights, ”he explained.
In other words, brick and mortar programs for government spending, which highlighted an important point: “Getting into debt can really be a good investment for the country,” said Oliver. “Essentially, as economists will say, the key question is, are you spending money on the right things?”
The host then gave a quick lesson on American debt policy. “Republicans love to argue that government should be run as a business, but they tend to conveniently forget that some extremely valuable companies have become so in part because they have spent long periods in which they have spent far more than they have earned,” he explained.
As president, Ronald Reagan was the self-styled hero of fiscal restraint, “but this story just doesn’t align with reality,” said Oliver. “He was not really promising to stop spending money, but promising not to spend it with certain people.” Reagan advanced the racist “welfare queen” stereotype that blacks abused the welfare system, justifying their cuts in food stamps and Medicaid; meanwhile, rising military spending and tax cuts have tripled the national debt.
That debt exploded with George W. Bush, who also cut taxes while overseeing the expensive War on Terror. But Republicans “didn’t seem to care” until Obama took office, Oliver said – indignation that eased when Trump inflated the national debt through tax cuts for the wealthy, which will cost the government $ 1.9 trillion in taxes. a period of 10 years.
“Even if you put all this hypocrisy in bad faith aside, we still have the key question: what is the debt worth?” Oliver continued. “And the interesting answer to that is that no one really knows.”
Last June, largely due to the increase in loans for Covid’s first round of stimulus projects, the US national debt exceeded GDP, previously seen by many economists as a rigid red line. However, interest rates remained at historic lows, confusing even economic experts; “We have no explanation,” said Olivier Blanchard, a former chief economist at the International Monetary Fund, at a fiscal summit in 2019.
The Congressional Budget Office has said that the debt-to-GDP ratio “does not have a definite tipping point” in which a crisis “becomes likely or imminent”.
The phenomenon has changed, at a very basic level, the way economists think about debt, with a new premise that as long as the economy grows at a rate higher than interest rates, the government will take the lead.
“There is a debate in good faith about how to deal with our national debt in the long run,” summarized Oliver. “But at the moment, most economists agree that, with interest rates at historic lows, the question shouldn’t be ‘How much debt are we taking on?’ as much as ‘What is the value of what we are getting in return?’ “
There are stupid financial decisions to be made, he added, like tax cuts for the wealthy. “And if it happens that inflation or interest rates start to rise, we must absolutely start to cut deficits, although not by cutting government programs that people need, but by charging taxes on people who can afford to pay.
“Look, nobody with credibility is saying that deficits don’t matter or that we should borrow as if the sky is the limit,” he concluded. “What they are saying is that the debate should not be about whether the debt is good or bad; it must be about whether the investments we are making are worthwhile or not.
“And if you’re still worried about debt because they said you’re overwhelming your kids and their future, well, I really have some good news for you,” he added before signing with a tactical scare-style PSA starring children against the fear of the “stupid debt watch”.