“It’s not what you don’t know that gets you into trouble, it’s what [some economists] know for sure that just ain’t so.” – Mark Twain
[Background: in 1981, the ratio of national debt/GDP was a robust 31% and falling. In 2023, after the Reagan/Bush/Trump tax cuts on the wealthy and many years of huge deficits, it was 122% and on an unsustainable trajectory (according to the WorlEvend Bank.) 2023 finances. More information about government finances]
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Middle School Math
Even a small percentage of a quantity that grows without limit also grows without limit.
Applied to National Debt
If we keep running huge deficits, the growth in GDP will have to keep pace with the increase in interest. It’s not happening. We can’t depend on it. If it doesn’t in the long term, disaster.
So in the long term, big deficits are really bad policy.
In the short term, for specific projects, debt can be justified,
(ChatGPT summary of Thomas Piketty’s views.)
“Governments should leverage national debt for long-term investments in public goods, such as education, infrastructure, and green energy. The idea is that these investments will pay off in the future, thereby benefiting the economy and society, justifying the debt incurred to finance them. He sees national debt as a tool that can be used to reduce economic disparities, rather than something to be eliminated at all costs.”
Debt should not be used to increase wealth disparity, as it has been in the US for the last 43 years
“Wealth Taxes Over Austerity
Piketty is critical of austerity measures, which often involve cutting public spending to reduce national debt. He argues that austerity policies tend to exacerbate inequality and slow down economic growth. Instead, he advocates for wealth taxes and progressive taxation to address inequality and finance government spending, including the management of national debt. Piketty sees wealth taxes as a way to create a more equitable society while allowing for responsible borrowing.
Debt and Globalization
Piketty has also noted that global inequality and the concentration of wealth in a few hands, particularly among the wealthiest individuals and corporations, can exacerbate problems related to national debt. He suggests that a global tax on wealth could help address these issues and mitigate the challenges posed by national debts, which often have to be managed within a context of uneven global capital flows.
Debt as a Tool of the Wealthy
Piketty warns that the wealthy have the means to benefit from national debt in a way that exacerbates inequality. For example, the rich often own large amounts of government bonds, which means they benefit from government borrowing in ways that the general public doesn’t. This, in turn, contributes to the rising wealth gap. To combat this, he proposes that the government should make sure that fiscal policies are more redistributive and that wealth is taxed appropriately.
Conclusion
In essence, Piketty does not view national debt as inherently harmful, especially in an environment where borrowing costs are low and investments are productive. His broader focus is on ensuring that debt is used to reduce inequality, support long-term economic growth, and finance public goods. At the same time, he is critical of policies that prioritize debt reduction at the expense of social investment or inequality mitigation.”
We should only borrow for the public good, not to make the rich richer.
Eventually, we’ll absolutely have to pay our own way.
Far better sooner than later.
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