Remember Chicken Little? That’s the story character who creates panic by telling everyone “The sky is falling!”
Republicans act like Chicken Little when it comes to government debt.
But they’re wrong. The sky is not falling.
Reason One: Government debt is not like your debt or mine. We may owe money to a credit card company or a bank. But the U.S. government owes money mostly to itself. Here’s how it works:
The U.S. government gets money by collecting taxes and by selling Savings Bonds and Treasury Bills. Eventually, the government has to pay off the bonds and bills. But guess who owns them: Mostly American institutions, like the Social Security Trust Fund, The Military Retirement Fund, and the Federal Reserve.* All these institutions are part of the government.
That’s how the government can owe money to itself. No sky falling here.
Reason Two: The U.S. government can sustain a good amount of debt, much like a U.S. family. Suppose your family has an income of $63,000. According to Zillow, a major online real estate database, you could comfortably afford to pay off a home mortgage of just over $274,000. That means you could afford debt about four times your annual income.
Compare that to our country’s debt. In 2016, our income from taxes was $6.3 trillion. Our debt was $20 trillion. That means, our debt was just over three times our annual income — less than ordinary people can afford.
No sky falling there either.
Reason Three: Government money pays for projects with long-term benefits. Think about roads, bridges, and other infrastructure. The government pays for these projects now, but they benefit the country for decades to come.
It’s a little like sending your kid to college or trade school. You pay upfront, but your kid benefits for a lifetime. Even if you take out a loan to pay for it, there’s a huge long-term benefit. Same for infrastructure and other government projects. Definitely no sky falling here.
No one is saying that long-term, uncontrolled debt is good. But when Republicans talk about “mortgaging our future” as a reason to slash spending, they’re using scare tactics. They’re falsely claiming the sky is falling to try to justify taking away services that ordinary people use: health care, after school programs, medical research. That’s wrong.
The deficit may be real, but the sky is not falling.
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*Foreign governments looking for a safe place to put money also buy Treasury Bills.