Maya MacGuineas has been crying wolf for years, and likely decades. She’s always been wrong not because she’s evil, or because she isn’t bright, but because she focuses on nominally large debt numbers rather than the real crisis. More on the real crisis in a bit.
For now, it will be said that government spending is economically harmful. Government borrowing is equally harmful since it expands on the very real problems of government spending. But to focus on either is to be distracted, and to miss the real crisis.
To see why, it’s essential to remember who among us can borrow. Whether it’s individuals, businesses or governments, those capable of borrowing can do so because they have well established credit in the marketplace.
In other words, the typical borrower has established to those with money to put to work that their incomings are impressive, and will enable the payment of monies borrowed back. It’s that simple.
To be fair to MacGuineas, she’s not the only one mistaking crises. As this hyperlinked piece by New York Times reporter Tony Romm indicates, MacGuineas has a number of true believers who traffic in the crisis narrative alongside her. What these experts left, right and center miss is that markets just are. They're neither left nor right, deficit hawk nor deficit dove. They're just information free of emotion. Yes, they're markets. and actual Treasury markets populated by investors with actual money at stake to continue to mock all the deficit and debt hysteria.
Why do market signals continue to reject all the deficit “hawk” misery? It’s at least somewhat explained in my upcoming book, The Deficit Delusion: Why Everything Left, Right, and Supply Side Tell You About the National Debt Is Wrong.
Debt markets, like equity markets, are a look into the future. Which is just a comment that the much bigger driver of debt on the individual, business or governmental level is the market’s expectation of how much revenue the borrower will take in years and decades into the future. It’s useful to contemplate forward-looking, incredibly deep Treasury markets parallel to MacGuineas’s latest, but surely not last, promise of a “crisis.” MacGuineas’s analysis, as is the case with her many teammates in the cause to create a “future” crisis where there isn’t one, implies that markets are ferociously stupid. No, that's not true. And that's particularly not true for Treasury markets, since Treasuries are by far the most owned income streams in the world.
Still, it must be said repeatedly that government spending is economically harmful exactly because the central planning of precious resources in politicized fashion is always and everywhere bad. The debt signals expansion of the crisis, but not for the reasons that MacGuineas et al imagine.
Of the view yet again that the $36 trillion (or whatever…) worth of debt foretells a crisis sometime in the future (something they've been incorrectly predicting for decades), they reveal themselves and their flock as oblivious to the real problem, which is the excessive taxation that enables so much borrowing in the first place. In other words, we have deficits and debt not because we’re undertaxed as MacGuineas et al contend, but because we’re overtaxed now alongside the expectation that we’ll be overtaxed well into the future. That which takes in lots of revenue now, and is expected to take in much more revenue in the future, can easily borrow.
Which is the crisis. Excessive tax revenue means too much tax revenue, even more borrowing based on the expectation of greater amounts of tax revenue, all in concert with increased amounts of central planning of precious resources. The crisis is a now thing, and always has been. Repeat it – yes – repeatedly.
Will this truth find its way into MacGuineas’s commentary? This excessive taxation alarmist isn’t holding his breath.
