Conservatives and libertarians talk rhapsodically about markets, while sometimes ignoring the market signals that reject their occasional alarmism. Which is why Montgomery College economics professor David Youngberg shouldn’t be singled out for predicting a debt crisis. Most conservatives and libertarians do.
In Youngberg’s case, hopefully he’ll see this critique for what it is: a push for him to re-think who gets to run up debt, and why.
About what you’re reading, it should be said up front that government spending is by far the biggest, most economy-sapping tax of all. The reality is that Jeff Bezos, Sergey Brin and Mark Zuckerberg would have worked at all manner of tax rates, but none could have innovated without the capital that government consumption obliterates.
In other words, disdain for debt alarmism is decidedly not the same as an embrace of big government, soaring budget deficits, and remarkable absurdities like MMT. No, disdain for debt alarmism is rooted in a reverence for market signals along with an even more deeply held view that the popular belief about “future” debt crises not only ignores market signals, but is a dangerous distraction.
Youngberg writes about a “looming debt crisis" at the American Institute for Economic Research. Hopefully readers familiar with a column that attacks government spending arguably more than any other can see where Youngberg misses.
If it were true that there was a debt crisis ahead, then it would also be true that the yields on Treasury debt would be soaring. That’s because markets for Treasury debt are easily the deepest in the world, and by extension Treasury income streams are the most owned in the world. Yet as evidenced by yields on Treasuries that have been declining for decades alongside rising debt, the markets are telling us there’s no discernible future “crisis” related to the debt.
It’s worth repeating that Treasury yields have gone down as Treasury borrowing has gone up. The latter is a market-based comment that if in fact there were a debt crisis in the offing, that it would reflect in much higher yields in concert with much less debt born of much less borrowing. Markets are powerfully wise.
Youngberg arguably glosses over what the markets are communicating, and instead contends that the debt will continue to go up even if there’s a tax revenue surge at Treasury. In his words, “Even if the government hits the tax revenue jackpot [from AI advances that lift the U.S. economy}, it’s naïve to assume lawmakers would pay down the debt.” Yes, in a sense. But isn't the vivification of Youngberg's pessimistic take a market signal indicating a problem of too much tax revenue?
If so, it speaks to the optimistic possibility that Youngberg could be convinced to rethink the source of his alarm. He once again believes that a tax revenue surge from AI-driven growth will result in more debt. Of course it will. Whether individuals, business, or governments, those taking in lots of revenue can borrow with ease. Just the same, those not taking in lots of tax revenue can’t borrow with ease. Markets are yet again powerfully wise.
Which speaks to the real crisis: it’s decidedly not about the debt. Low Treasury yields are the markets saying tax revenues in the present are a pale imitation of what they will be in the future, hence all the debt.
The crisis? It’s unseen, but gruesome. How to gauge all the snuffed-out progress in the past, present and future as excessively high tax revenues make it so easy for the federal government to borrow. Bastiat would get it. Maybe Youngberg too?
