Bloomberg (10/14/16) decided to get into the Halloween spirit by warning our kids about the national debt. The piece is headlined “A Child Born Today Comes Into the World With More Debt Than You.” Bloomberg was going to headline the piece, “Kids Worried That Universe Is Closer to Destruction Than When Parents Were Born,” but they decided it would be too scary.
The highlight of the piece is a graph showing the rise in the amount of debt per person over the last three and half decades, along with the money graph:
Under current law, US inflation-adjusted debt per person is expected to reach the $66,000 milestone by April 2026, based on Bloomberg calculations of Congressional Budget Office and Census Bureau data.
It adds that the debt would be considerably larger as a result of Donald Trump’s tax cuts and slightly larger as a result of Hillary Clinton’s tax and spending programs.
OK, folks, you should be able to guess why this Bloomberg piece is a silly joke. That’s right, it only takes the debt side of the ledger. It’s almost impossible to exaggerate how absurd this is.
It is an absurdity that no business would ever engage in. I suspect that Microsoft has much more debt than the restaurant down my street. If Bloomberg business coverage was like this piece, it would be highlighting Microsoft’s massive debt. Furthermore, it would be warning that Microsoft’s debt is likely to be even larger in a decade. Fortunately, Bloomberg doesn’t report on Microsoft this way, because it has serious business reporters. They would report on Microsoft’s debt in relation to its assets, and its debt service in relation to its revenue or profits.
Bloomberg could report on the government debt in this way, but it wouldn’t have the same effect for Halloween. If it reported on debt in this way, then it would be pretty obvious and totally non-scary that our per capita debt rises through time. Our per capita income rises through time. So what?
And if Bloomberg cared about actually providing information on the burden of the debt, it would be reporting on the ratio of debt service to GDP. Currently, this is around 0.8 percent of GDP (net of money refunded by the Fed to the Treasury), which is near a post–World War II low. By comparison, debt service was over 3.0 percent of GDP in the early 1990s, when the parents of today’s kids were born.
It’s also worth noting the absurdity that in the Bloomberg Halloween debt story, our children would be better off if we eliminated public schools and funding for their education altogether. After all, this way we could reduce their debt. In fact, they would be even better off if we stopped spending to maintain and improve infrastructure. Hey, who needs airports, roads, bridges, access to the internet? Let’s get the debt down!
We can sell off all government assets, turn Yellowstone over to Disney, allow oil and gas drilling everywhere. Forget about global warming, get the debt down!
If this still makes sense to you, then you have a promising career with the Peter G. Peterson Foundation, but you don’t belong in a serious policy discussion. The nominal value of the debt tells us essentially zero about the well-being of our children. It is, however, a good point to highlight for folks with a political agenda that includes cutting Social Security and Medicare–a group that seems to include Bloomberg.
One other point that is worth highlighting on Bloomberg‘s nonsense is that debt is just one way in which the government makes commitments of future income. It pays for many things, like innovation and creative work, by granting patent and copyright monopolies. These monopolies effectively allow private companies to tax the public by charging prices that hugely exceed the free-market price.
This is most visible with patent protection for prescription drugs. We will pay more than $430 billion this year for drugs that would cost us 10–20 percent of this amount in a free market. This translates into more than $350 billion (about 2 percent of GDP) in excess costs just for prescription drugs. The Bloomberg/Peter Peterson gang would have us pay no attention to these huge burdens, but they will matter much more to our children than the burden of the debt. Oh, did I forget to mention that Bloomberg benefits from copyright monopolies?
(Yes, we have to pay for innovation and creative work, but there are far more efficient and modern mechanisms. See my book, Rigged: How Globalization and the Rules of the Modern Economy Were Structured to Make the Rich Richer, coming soon to a website near you.)
Economist Dean Baker is co-director of the Center for Economic and Policy Research in Washington, DC. A version of this post originally appeared on CEPR’s blog Beat the Press (10/14/16).
Bloomberg can be reached via Twitter at @BloombergNews. Please remember that respectful communication is the most effective.