Soon we’re going to read and hear a lot about one of Trump’s promises: extending the 2017 Trump tax cuts, the income tax cuts that mostly benefited the already wealthy and corporations. (While every Republican mouthpiece repeated “money in your pocket” as a distraction for the gullible.) This was the windfall that corporations were supposed to use to build factories, the benefits from which would “trickle down” to everyone else—but which, instead, were largely used to fund stock buybacks, driving up stock value that further enriched the already wealthy.
Entwined in the same news about extending the “cuts” will be talk about the need to raise the “debt ceiling” lest the government default on its debt obligations and have its credit rating downgraded.
The National Debt is a big, scary number now at somewhere around 36 trillion dollars. It is a number that Republicans point to at every opportunity—EXCEPT when their actions increase the debt. There is even a frequently pictured “National Debt Clock” in New York City that purports to display the continually increasing number representing the debt as if it were an official, government-calculated tally. In fact, as you can read about at this link, the National Debt Clock is a bit of economic propaganda erected by New York real estate investor and developer Seymour Durst to emphasize his particular belief in the dire consequences of the national debt. (Incidentally, Seymour is the father of the infamous convicted murderer Robert Durst.)
In fact, the material importance of the big, scary number is a subject for serious and heated debate among economists, a debate that is seeping into the national consciousness. “The Deficit Myth: Modern Monetary Theory and the Birth of the People's Economy” by Stephanie Kelton, published in 2021, was a New York Times Best Seller. Dr. Kelton, professor of Economics at Stony Brook University, served as an advisor to Bernie Sanders’ 2016 presidential campaign. She and others argue that the size of national debt is largely irrelevant as long as inflation and unemployment are kept in check.
The big scary numbers representing the “national debt” and “the debt ceiling” have been systematically used by Republicans since the Reagan administration to bludgeon Democrats, as Thom Hartmann explains in “Here Comes the Republican Santa Scam Again.”
I highly recommend John Oliver’s segment on the National Debt for perspective. It is one of the most accurate—and entertaining—explanations of an economic concept I’ve ever heard. If you click the underlined link it will take you to the twenty-two minute YouTube video of his presentation.
Perspective on the “Debt Ceiling”
It seems like we just went through a threat of a “government shutdown” that would have resulted from an impasse over the details of a Continuing Resolution (CR) to fund the government before the deadline on the Friday before Christmas. Soon we will hear of another threat to keeping the federal government solvent: the need to “raise the debt ceiling”—yet another way to keep the spotlight on the national debt.
You may recall that president-elect Trump demanded that last December’s Continuing Resolution include raising or abolishing the debt ceiling—a demand that was not fulfilled. He and Vance effectively said the quiet part out loud:
"Increasing the debt ceiling is not great but we'd rather do it on Biden's watch," Trump and Vance said in their statement.
Of course they would “rather do it on Biden’s watch”. It’s much better, from the Republican point of view, to force a rise in the debt ceiling on a Democrat’s watch than it is to draw attention the fact that Trump’s promised additional tax cuts for the already wealthy will contribute to the national debt.
Remarkably, the United States is the only country on the globe with an absolute debt ceiling (rather than a percentage of GDP) that must be periodically raised to accommodate more debt. (Denmark, the only other country with an absolute debt ceiling, sets the ceiling so high that it is essentially irrelevant.)
In truth, having to “raise debt ceiling” is a stupid exercise that violates common sense, after all, if you knowledgeably appropriate the funds you’ve effectively approved a debt ceiling increase—but Republicans are unwilling to give up the debt ceiling exercise as a point of leverage and an opportunity to grandstand. The need to raise the debt ceiling dates back to the First World War. Raising the ceiling was consistently a routine exercise until the 1990s. In fact, noting the financial danger of default that would be a consequence of failing to raise the ceiling, in 1979 Dick Gephardt imposed the “Gephardt Rule”, “a parliamentary rule that deemed the debt ceiling was raised when a budget was passed.” Duh. Then, in 1995, the Republican-dominated House during the Clinton administration repealed the Gephardt Rule. The era of Republican brinksmanship over the debt ceiling, the game of chicken, commenced.
Every time you hear “National Debt” or “Debt Ceiling” take note who brings it up and what they’re advocating. Chances are it will be a call to cut things like Social Security in order NOT to raise the debt. Never mind that tax cuts for the wealthy and for corporations just as surely raises the Debt.
Keep to the high ground,
Jerry