New York Times economics reporter Annie Lowrey's "news analysis" on Wednesday downplayed the gargantuan national debt: "Dispute Over a Balanced Budget Is Philosophical as Much as Fiscal."
Lowrey, who on March 2 called the hard-to-detect budget cuts of sequestration "painful and stupid," gave the game away in her lead sentence, signaling that she doesn't really think that enormous debt is much of a crisis:
What is so special about a balanced budget?
That question is at the heart of the warring Republican and Democratic budget plans coming out this week -- with Representative Paul D. Ryan of Wisconsin vowing to eliminate the federal deficit within 10 years, and Senator Patty Murray of Washington State setting a more modest goal of bringing spending closer in line with revenue over time.
Obama himself made the same argument in an interview with ABC's George Stephanopoulos, saying, "My goal is not to chase a balanced budget just for the sake of balance."
The national debt figure is now running over $16 trillion, making it over 100% of nominal Gross Domestic Product, But those frightening figures failed to make it into Lowrey's story:
While economists generally agree that narrowing the government’s deficit and limiting the size of the debt are necessary in the long run, most argue that balancing the budget would not restore the nation’s still-weak economy to health in the near term. Indeed, rushing to do so with unemployment still elevated and the economy growing at only a sluggish pace could even set back the effort to reduce the deficit.
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Economists offered more nuanced views. Closing the budget gap over the longer term could be vital to sustaining economic health, some stressed, by ensuring that the government did not crowd out private investment and by helping to keep interest rates low. But that does not make it an immediate necessity.
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Other goals -- including stabilizing debt as a proportion of economic output, rationalizing the tax code and tackling the long-term fiscal challenge posed by entitlement programs -- might prove more important in the coming years, several experts said.
“We need to do fundamental reforms to the system, and if we did fundamental reforms to the system, that would help so much that we wouldn’t need to worry about the deficit as much,” said Kenneth Rogoff of Harvard.
As sensible as a balanced budget might sound -- much like a balanced checkbook for a family -- countries are generally able to run modest deficits for years on end while still keeping debt stable as a share of economic output. One year’s deficit is effectively paid off by later economic growth, especially if a government is investing in public goods like roads and schools.
Lowrey eventually made room for dissenting "right-leaning" views:
But several right-leaning fiscal experts described a balanced budget as a tool to force a fractious Congress to tackle the nation’s long-term budget problems.
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A broader question, economists said, is the long-term effect the country’s debt load might impose on the economy. In the past few years, a number of broad-based studies have suggested that having government debt equivalent to or greater than about 85 or 90 percent of economic output might eventually cut into growth. Currently, public debt in the United States is about 76 percent of the size of the economy. Including debts the government owes itself, like in the Social Security Trust Fund, the total load is in fact bigger than a whole year’s economic output.
“The people who say the debt is irrelevant -- that’s going too far,” said [Kenneth] Rogoff, who along with Carmen Reinhart of Harvard produced a study of the interplay between debt and growth. “It’s a very rarefied air that we’re in already. And it could be a problem. You can’t turn your debt around in a year, and you cannot reduce debt quickly and easily.”
Rogoff could be talking about Times columnist Paul Krugman, who notoriously claimed in an interview in May 2012 with Charlie Rose that when it came to debt as a percentage of the size of the economy, "25% would be optimal but you can live with 100% for decades on end. And right now isn't the time to be worrying about that number."
