The Debt Panic: CALM DOWN

Here is Paul London on: The Needless Panic Over Government Debt.

Previously, he focused on the needless panic over inflation:

A Better Way to Fight Inflation — February 21, 2022

Inflation Terror at the Fed— July 11, 2022

Invest More Or Obsess About Inflation And Debt: It’s Our Choice — July 20, 2023

Today’s panic over government debt, he argues, is more insidious because there is a very good chance that it will lead to a recession and drastically reduce our ability to counter Russian and Chinese efforts to destroy the post World War II order that has done the US and the World so much good.

Three additional points worth noting:

(1) Republicans never worry about the National Debt when they control the White House.  Reagan famously sent it soaring by slashing taxes on the wealthy, which Bush 43 and Trump just made much worse.

(2) Republicans fight to cut resources the IRS needs to collect taxes from the wealthy.  That would just increase the deficit.

(3) As long as our Debt isn’t growing relative to the economy as a whole in most years — and ideally shrinking a bit — we’re okay.  The Debt (most of it owed to ourselves) is $33 trillion.  With GDP growing at 5% — between real growth and inflation — the Debt can also grow at 5%.  Which is to say: a deficit of $1.65 trillion (5% of $33 trillion).  Less than that would be great; but more than that is called for when we face a special challenge.  Like averting financial collapse.  Or pulling ourselves out of a recession.  Or thwarting the expansionist ambitions of a power-mad murderer like Hitler or, today, Putin.

Have a great week-end!

(Have you seen Dumb Money?)