By Brad Friedman on 2/26/2013, 10:47am PT  

I'd strongly recommend that you read this piece by Jeff Spross, entitled "The Debt Everyone is Freaking Out About Does Not Exist", in full. It's a very smart and sober primer explaining...well, exactly what the headline says.

Yes, Washington D.C. and the corporate media which cover it, are spending a whole lot of time and resources playing into what amounts to a massive presentation of kabuki theater, and its not one that actually helps us with the addition of new jobs or economic growth in any real way whatsoever. Arguably, as Spross explains, it may well accomplish just the opposite.

It's difficult to select just the key passages from the piece, as mentioned, since it's chock full of smart analysis throughout. But, for those without the patience to read the whole thing, here are a few of the central thoughts that you should educate yourself about...

Some of the debt certainly exists, like the roughly $11.6 trillion owed to foreign and private creditors. But that isn’t the debt anyone’s worried about. If we stopped adding to it tomorrow, the debt as it stands would pose essentially zero threat to the country’s fiscal health, as the ongoing growth of the economy would send our debt-to-GDP ratio dropping like a rock.

So the debt that’s got everyone worried is the part we haven’t yet incurred. And that debt, by definition, does not exist. It’s not a certainty, it’s merely a projection by the Congressional Budget Office. And trying to model how the federal budget, not to mention the entire American economy, will behave years or even decades in the future is a devilishly treacherous business.

For instance: one of Rep. Paul Ryan’s (R-WI) favorite talking points in 2011 was that the computer simulations CBO uses to model the economy crash when they attempt to account for the debt load in 2037. Imagine trying to model the 2011 economy in 1985. Things you’d never see coming include (among other things) the Internet, fracking, massive advances in computing power, the renewable energy boom, three wars, a massive recession, and Harry Potter. And predictions can be hard even over shorter time frames. In 1995, CBO predicted the deficit in 2000 would be well over $200 billion. We ran a surplus of $236 billion.

In fact, Ryan plastered dramatic graphs of debt going out 75 years onto everything in sight while stumping for his last budget. Forget predicting 2011 in 1985. That’s like predicting 2011 in 1940.

So neither the impending Baby Boomer retirement nor growing health care costs make astronomical debt a certainty, despite the insistence of the conservative and centrist punditariat. With respect to the Boomers, economist Dean Baker ran the numbers and found that if productivity growth in the economy clocks in at one percent until 2035 (a very conservative estimate) the resulting gains will swamp the added retiree burden.

Spross goes on to explain how even the freak out about rising health care costs, and the threat it is said to pose to Medicare and Medicaid should not be taken for granted either, since it's based on curves that change, for different reasons, over time. It has already begun to change, he notes, as health care costs have "unexpectedly slowed to a 50-year low since 2009," about which he adds (and explains why): "We probably have Obamacare to thank for that."

He argues that we are, essentially, "fixating on a problem that may or may not exist," and by doing so, "Policymaking becomes less about solving concrete problems ... and more about made-up numbers on an Excel spreadsheet."

This choice to prioritize a phantom number over real-world evidence has consequences. In a depression, spending cuts suck demand out of the economy, leading to slower growth. Remember: the denominator counts as much as the numerator in the debt-to-GDP ratio. Europe has so far pursued austerity with markedly more enthusiasm than the United States, and its economic performance predictably tanked as a result. Spain and France are anticipated to miss their latest debt-cutting targets, and the Continent as a whole will probably not see renewed economic growth for another year.

Both in Europe and here in America, we have tax codes that by their nature bring in less revenue when the economy goes into a downturn, and a series of safety net programs designed to ramp up when unemployment rises. The vast majority of the deficits we’ve seen since President Obama took office were due to the 2008 collapse. Under depression conditions, deficits are a feature, not a bug.

But these excerpts, even as extended as they are, don't do the full story justice. As I said, do yourself a favor and go read the whole thing.

* * *

By way of just one more piece of added perspective on this issue. Here is the public debt-to-GDP ratio for a whole bunch of developed countries, and for the world as an average. As you can see, in 2010, the U.S. was below most of the other developed nations on this score, and just a touch higher than the average of world countries...

If you followed the news of late out of Washington, however, you'd think we're on the brink of complete debtpocalypse! That's a pretty clear victory for D.C. Republicans, and, as usual, a clear failure of both Democrats and the U.S. corporate media.