In May 2012, Market Watch published a column by Rex Nutting full of inaccuracies and budget absurdities. I took Nutting’s piece to task, as did others, and hoped that his future writing would be of better quality.
That hope was misplaced. Last week, Nutting came out with another column boasting even more inaccuracies.
First, Nutting says “[t]he $16 trillion debt sounds like a terrible thing, but no one has been able to show how this high level of debt has had any negative impact on the economy or on the people so far. Has anyone come around looking for your share of it?”
This claim is absurd, especially in light of the widely-known 2010 paper showing that America’s debt level – relative to the size of our GDP – is a major problem. In fact, the paper shows nations with debt-to-GDP levels exceeding 90% have significantly lower growth rates. Our debt-to-GDP ratio is currently over 100 percent.
Next, Nutting says interest rates are very low, and thus are not problematic. The first half of this is true, but given the size of our debt the payments are problematic. In 2011, for example, interest payments were $454 billion, or 12.5% of federal spending, largely because of the slow economy recovery. (This could buy 1,538,983 Ferraris, or 1,137,844,611 iPhone 5s.) If the economy were better, interest rates and payments would be much, much higher.
Nutting claims Reagan exploded the budget. Relatively speaking, Reagan’s spending is nothing compared to what is going on today. Moreover, Reagan’s efforts also led to massive economic growth and the destruction of the USSR, leading to the so-called “peace dividend” and defense spending reductions in the 1990s. Currently, America currently faces massive entitlement and economic challenges not seen in the history of the country.
Nutting’s next claim is a long-proclaimed canard of big spenders: “The high debt is the consequence of the depression, which decimated revenue at the same time that it opened the gates for more spending on relief and recovery.” Yet CBO estimated in October 2011 that almost two-thirds of the expected deficit in Fiscal Year 2012 was due to spending unrelated to the recession. Only about 36% of the expected deficit was due to lower-than-normal revenue and recession-related spending.
This is possibly the worst claim in the piece: “We must keep in mind that our debt is a financial problem, one that can be remedied essentially with the stroke of a pen.” I’m not sure whose pen he means, but both the Congressional Budget Office and the Treasury Department are saying it’s going to require a lot more than a signature to get future debt under control. Hundreds of billions in spending cuts and/or tax increases are needed in short order.
Nutting eventually gets into the five problems he says are greater than the debt. The first is unemployment – but as expected, he fails to note how the debt impacts economic growth, as mentioned above. He also says to consider “what we could have done” if America’s leaders had put one-tenth of the attention given to deficit reduction to reducing the unemployment rate. This claim ignores how the GOP-controlled House has passed many measures to increase economic growth, including energy reform legislation and legislation to reduce regulatory burdens.
Next up is global warming, which Nutting blames for Hurricane Sandy. Roll eyes, move on.
Infrastructure is Nutting’s next target, which he says we need more of. While it is true that America’s infrastructure is aging, I doubt the same Administration that didn’t realize “shovel-ready jobs” weren’t shovel-ready is going to do a good job on infrastructure “investments.” Additionally, America can’t afford the “investments” we’re making now; how can we add more money to them? Like a family that forgoes renovations until enough is saved and/or more income is earned, we as a nation must prioritize fiscal responsibility over improving infrastructure.
Nutting also targets inequality as a problem. He is right – the growing power of Washington, and the growing power of Washington’s special interest buddies is a problem. This can be remedied by limiting the federal government to its constitutionally-bound size, instead of giving tax credits and hundreds of billions of dollars to pals and campaign donors.
Lastly, Nutting says democracy is being threatened. Apparently, the First Amendment (via Citizens United) and requiring IDs at polling places is some kind of threat to our nation, as is the filibuster. And Nutting goes after the so-called “Hastert Rule,” which says a majority of one party must support legislation in the House to pass it…even though Speaker Boehner has twice broken that tradition in the last two months.
Nutting closes by saying the debt problem doesn’t even exist. “After a several deficit reduction deals in Washington, the public debt is now on course to fall as a percentage of gross domestic product. If Congress can agree on a little few more cuts and a little more revenue, the debt would stabilize as a share of GDP. That’s the goal.” Yet that Treasury Department report mentioned above? It recommends deficit reduction to the tune of over $400 billion for the next 74 years, and that number likely underestimates the situation.
Tea Party activists know the truth Nutting refuses to acknowledge: short of a national plague or world war, the national debt is America’s greatest problem. Ignoring it, as Nutting advises, is to continue putting the nation’s future at risk, especially for younger Americans.