Monthly Archives: November 2014

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Obama’s Political Brilliance

It’s been widely expected that President Obama will take unilateral action on immigration.  On Thursday night, we’ll finally get to see Obama’s plan as he will unveil expected executive action in an address to the nation from Las Vegas.

What a brilliant political move!

I’ve long chided Democrats for their messaging failures and inability to grab an issue by its horns and take control of it.  Republicans are experts at messaging and controlling an issue – look at Benghazi, Obamacare, and even the economy.  Immigration, however, is one issue the Democrats dominate.

Undoubtedly, Democrats are in the drivers seat with regards to this issue because Republicans nobly failed to enact immigration reform and even stood staunchly against it.  Despite promises from Senator Marco Rubio (R-FL), the Republican House failed to work with the Senate Democrats to compromise on immigration reform.  At least that’s how the American voters view the situation (a message that was successfully developed by Democratic leadership).  Voters see Democrats as taking initiative on immigration whereas Republicans are but an obstacle.

That was likely to change, though, after the 2014 midterm elections.  Republicans, undaunted by being labeled as the party of “No”, won Congress and thus can now control the legislative process.  A rational Republican congress would seek to pass comprehensive immigration reform.  It’s in the best interest of the Republican Party to utilize their Congressional majority, developing a track record on which congressional candidates and their presidential flag-bearer can run in 2016.  Being able to turn to accomplishments that are acceptable to the American people will give legitimacy to a Republican majority and buoy their chances at maintaining and furthering their congressional majority.

Plus Republicans do not fare well with minorities.  If Republicans are able to take control and credit for immigration reform, they could offer a substantial argument as to why minorities should support them in future elections.  Republicans have everything to gain by championing immigration reform.

President Obama undercut them.

By taking the issue out of legislative hands, Obama can enact far-reaching reform and, most importantly, he will claim a victory for the Democratic Party.  Immigration reform will bolster Democratic credentials with minority voters and likely keep and solidify their support for Democratic candidates.  Republicans would have had a chance to claw minority support away from Democrats, but Obama’s executive actions will prevent this from happening.  Considering a large turnout of minority voters was a crucial element of the Obama-coalition – a bastion of support for the president in 2008 and 2012 – Democrats want not only to repay them for their support, but to keep minority voters in their base camp.

The midterm elections prove how poorly Democrats fare when voter turnout drops.  Mobilizing minorities would likely be challenging in the future if Democrats could not appeal to a positive track-record.  Minority voters will be key in consolidating support in newly-blue states like Nevada and New Mexico and if the Democrats want to have any chance of putting Arizona and Texas into play, they need to mobilize and win support of minority voters.  While immigration reform won’t guarantee minority support – after all, to assert that they are single issue voters is insulting – it provides an important victory and offers evidence of the beneficence of electing Democratic officials.

After the midterm elections, the immigration ball was rolling into the Republican’s court.  Obama swooped in and returned it to the Democrat’s side.  Should Obama deliver sweeping immigration reform, the Democrats will have scored a huge electoral and policy victory.  Well done, Mr. President, well done.

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Joni Ernst and the Democratic Failure

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Joni Ernst
Joni Ernst, Republican Senate candidate from Iowa

Iowa and the Democratic Failure

Joni Ernst, the Republican senatorial candidate in Iowa, is expected to win the open Iowa Senate seat. Nate Silver of 538 Blog gives her a 70 percent chance of winning. Recent polls give her lead as large as 7 points. This is a seat Democrats should win, not necessarily because of the strength of the Democratic ground-game or because Bruce Braley is a great candidate but because Joni Ernst is a radical. Didn’t know that? That’s because Democrats often fail to convey Republican radicalism and extremist rhetoric in a way that sticks with voters. This failure could cost the Democrats the Senate.

Ernst is sympathetic to the idea of nullification. Though she has never explicitly endorsed the idea of nullification, she did say “we have talked about this at the state legislature before, nullification.” What? The Iowa State Senate talked about nullification? It continues:

as U.S. Senator why should we be passing laws that the states are considering nullifying? Bottom line: our legislators at the federal level should not be passing those laws. We’re right…we’ve gone 200-plus years of federal legislators going against the Tenth Amendment’s states’ rights. We are way overstepping bounds as federal legislators. So, bottom line, no we should not be passing laws as federal legislators—as senators or congressman—that the states would even consider nullifying. Bottom line.”

Bottom line: senatorial action should be guided by the premise that states can nullify laws. This presupposes that states can nullify laws.

States can’t do that. Nullification and idea of state sovereignty over the federal government were huge contributing factors to the Civil War. Some outside group easily could have created a political ad in Iowa with dialogue along the lines of “Joni Ernst is sympathetic to the idea of nullification. I thought we settled that a long time ago, in 1861, with the Civil War.” Strong rhetoric but it would be resounding. It pegs Ernst as a radical. Democrats didn’t do enough to make it clear that Ernst supports an idea that contributed to the onset of the Civil War.

In January of 2014, Ernst stated that President Obama had “become a dictator” and needs to face consequences for his actions, “whether that’s removal from office, whether that’s impeachment.” Without substantiating her claims whatsoever, Ernst contends that “he [President Obama] is not following our Constitution”.

I could write a very long article about how Obama is acting within Constitutional limits. Republicans are quick to call for impeachment without any actual grounds for such an action. Their favorite talking point, Benghazi, remains a ridiculous conspiracy. There’s talk of impeachment for his actions in Libya even though they were constitutional under the War Powers Act. Anything other calls for impeachment are on purely ideological grounds – radical conservatives don’t like Obama’s liberal policies and therefore he must be violating the Constitution and should be impeached. It’s ridiculous. That a candidate for the highest legislative house in the country can make such incredulous statements and still be poised to win is the fault of voters and Democratic operatives. I would make an argument about how Obama is not a dictator, but by doing so I would be giving an ounce of standing to her insane assertion. While it’s harder to make good soundbites from these comments because of voter ignorance and apparent readiness to embrace populist anger over unsubstantiated claims, it would be possible to create a lit piece outlining the error in her statements. Or they should create an ad with the soundbite of the image. Voters may be ignorant, but they can tell craziness when they hear it (for the most part). Let Ernst’s words sink her campaign.

Her craziness continues with remarks about Agenda 21. Many people outside of the far-right GOP have not heard of Agenda 21 and there’s a natural reason for that – it’s not a big deal.

Agenda 21 is a voluntary action plan developed by the United Nations and national governments at the “Earth Summit” in Rio de Janeiro, Brazil, in 1992. At the Summit, governmental leaders around the world agreed on the need to become more sustainable—to meet today’s needs without sacrificing our future. Agenda 21 presents a vision for how all levels of government—especially in the developing world—can take voluntary action to combat poverty and pollution, conserve natural resources and develop in a sustainable manner.

Agenda 21 is a non-binding agreement that seeks to offer a vision for a better and more sustainable world. Fringe Republicans, though, have seen it as a conspiracy that launches a major threat to private-property laws in America. Ernst is one of them, saying

The United Nations has imposed this upon us, and as a U.S. senator, I would say, ‘No more. No more Agenda 21.’ Community planning — to the effect that it is implementing eminent domain and taking away property rights away from individuals — I don’t agree with that. And especially in a place such as Iowa, where we rely heavily upon our agricultural community, our rural communities. We don’t want to see things like eminent domain come into play

She demonstrate absolutely no understanding of the implications and visions of Agenda 21. What she’s saying nonsense and demonstrates, along with her aforementioned beliefs of nullification and impeachment, the gross lack of critical thinking and reasoning abilities. Ernst is motivated by the likes of Glenn Beck, radicals who perceive threat when there is none. There is no basis for her attacks on Agenda 21. Here’s some text democrats should have used: “Joni Ernst doesn’t believe in environmental sustainability. Do we really want someone who fails to understand the importance of sustainable agriculture to represent the people of Iowa?” and/or “Joni Ernst fails to understand even the most basic pieces of legislation. Her gross interpretations of Agenda 21, which provides a vision for a sustainable future, twist her viewpoints to extremism. Do we really want a Senator who can’t understand basic policy?” Don’t be nice, Democrats, attack her and expose her for the radical she is.

Don’t be nice, Democrats, attack her and other Republicans for the radicals they are.

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On the Equality of Women

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John Stuart Mill, in his essay The Subjection of Women, makes the strong case that the two sexes are, contrary to popular belief during his time, equal, a seemingly obvious and natural conclusion. Rather than simply rely on what should be apparent – a theory of natural human equality that is preexistent because we are all human – Mill delves into a moral approach to the subject, arguing that gender equality is beneficial for us all because it will “progress society.” Given the popular resentment towards the theory of inherent equality, Mill’s technique of tying gender equality to his other works on utilitarianism, most notably On Liberty, sufficiently appeals to logic and reason in a convincing fashion.

Reluctantly assuming the burden of proof in this argument – Mill believes in the “a priori presumption…of freedom and impartiality” the violation of which should indict a person to hold the burden of proof – he spends a little time railing against having to contend with the “hostility of [people’s] feelings and practical tendencies” despite those sentiments having no “logical resting”. Mill’s believed that “the legal subordination of one sex to another – is wrong in itself, and now one of the chief hindrances to human improvement; and that it ought to be replaced by a system of perfect equality, admitting no power and privilege on the one side, nor disability on the other.” His most eloquent and resounding argument for holding such an opinion is his appeal to societal progress. Society could be enriched, he reasoned, with the “emancipation” and education of women. Educated women would provide competition in the workforce, supporting meritocracy and bolstering the economy. Competition spurs the need to improve oneself in order to maintain a comparative advantage in a certain trade. The introduction of further competition in the labour supply would promote greater efficiency and necessitate higher skill amongst workers so they remain employable.
Higher skill and higher individual efficiency increases output and benefits the economy as a whole. Beyond the economy, Mill argues that education and free women would encourage intellectual development because “even a really superior man almost always begins to deteriorate when he is habitually king of his company” and given that “his most habitual company” is his wife, an intellectually inferior wife is the primary cause for the deterioration of a “superior” man. Therefore, it is necessary for women to be education if for no other reason than to promote intellectual development by having women engage their husbands in thoughtful dialogue and challenging preconceived ideas. Mill takes this a step further and asserts that women intellectually on par with their husbands would even better a relationship.

These arguments for educating and liberating women – which would imply equality on at least the most basic grounds – all lead to the same conclusion: societal enrichment. Such a conclusion is convincing to many because it doesn’t challenge that women are naturally equal (though Mill does, indeed, make that case). Standing alone from the essay, this train of thought appeals to men because the conclusion is a necessary betterment of life for all men (equalizing the other gender being a happy consequence). It is difficult to change one man’s pre-conceived notions on equality, it is much easier to get that man to support policies that will directly better his life. Why not allow women to be educated if it means my standard of living will increase and my marriage will be happier? Through this knowledge of his audience, Mill is able to deliver an eloquent call for gender equality, one that could be supported by many not on any philosophical grounds, but on strictly economic grounds – an appeal to bread and butter needs that so often throughout history has seen resounding success.

While it is clear and intrinsic that men and women are equal on the sole basis that they are both human, such a viewpoint was – and, frankly, still is – disturbingly uncommon. This is what makes Mill’s essay so enticing to many. He states that men and women are equal, which appeals to feminists and some of his audience; assumes the burden of proof, thereby presenting logical arguments; and doesn’t focus entirely on moral grounds – he appeals to basic economic and emotional wants and needs. Mill effectively presents arguments for all blocs of society and by doing so, creates a resonating piece that furthers the end goal of complete gender equality.

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Debt: An American Obsession

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Debt: An American Obsession

America is suffering from the disease of misguided rhetoric. Common though this ailment is, in certain circumstances it has a more damaging effect than in others. The economy – the most vital organ in a country – is being choked because of anti-national-debt rhetoric and sentiments. Many Americans view public debt as toxic – a financial element that needs to be avoided at all costs. In reality, as Alexander Hamilton, the first Secretary of the Treasury, stated, “national debt, if it is not excessive, will be…a national blessing” that can boost the economy, create jobs, wealth, and lower debt in the long run. Given the current economic malaise, the purveying anti-debt sentiment is actually preventing a return to high employment rates, high labor participation, and respectable GDP growth. The fixation with the level of debt is detrimental to the American economy because it prevents certain stimulatory actions from being implemented – actions that would boost aggregate demand and GDP, creating jobs and wealth. American debt is not, as many Americans and politicians believe, yet at a dangerous point, as evidenced by the market’s faith in America’s ability to repay debt, a public debt to GDP ratio that is far from a historical worst, and a relatively and economically safe public debt to GDP ratio. The dangerous anti-debt feelings are the fault of the media, whose indexing model cause politicians ignorant debt statements to become widespread and not subject to challenges by another school of thought. America, indeed, has a flawed fascination with lowering the national debt when the general populace – as well as politicians – need to realize that our debt is not so bad as rhetoric suggests, that Keynesian economic principles that will expand the debt in the short run need to be implemented, the austerity measures rampantly chased and endorsed by conservatives does not work, and the media needs to change its framing of the national debt – which, due to indexing, will likely only occur if politicians once again begin to view debt as a tool by which a booming economy can be created.

As America plunged into the throes of the Great Recession, suffering tens of millions of lost jobs and financial agony, the political response to the plight of everyday Americans was to focus on job creation. Not just job creation, but job creation whatever the cost may be to the federal checkbook. That sentiment led to the 2009 passage of an $800 billion stimulus bill (the American Recovery and Reinvestment Act), which succeeded in stopping the hemorrhage of job loss and creating around 2 million jobs (Cohen). However, despite its successes, the reaction to the stimulus was largely negative because unemployment remained at a startling 10% (Leonhardt), and instead of focusing on the objective flaws of the stimulus (which revolved around its size, an amount that was too small to combat the depth of the financial crisis), Republicans and the emerging Tea Party seized voters’ anger caused by high unemployment, channeled that anger into an electoral victory, and began to push forward austerity measures which claimed to reduce the deficit and debt while creating jobs. The midterm elections of 2010 and resulting Republican takeover of the House and gains in the Senate caused the rhetoric and political actions of Washington to shift from job creation at all costs to a flawed fixation with curbing runaway deficits and lowering the national debt.

Even before the midterm elections, President Barack Obama gave credit to the Republicans’ political agenda, stating in the 2010 State of the Union address that “if we do not take meaningful steps to rein in our debt, it could damage our markets, increase the cost of borrowing, and jeopardize our recovery” (Sahadi). This change in rhetoric – from job creation and growth to a focus on taming the debt – was quickly echoed throughout the media, building a grassroots hatred of debt – a sentiment from which the Republicans would easily and happily draw in the midterm elections. Following Lance Bennett’s principle of “indexing”, which states that the media tends to echo issues advanced by politicians and the media focuses on the sides argued by opposing politicians, even if those positions have no basis in fact – the media’s reporting of debt dramatically increased immediately following the State of the Union address and once again during the run up to midterm elections. The combination of increased news reporting and changing political rhetoric was primarily responsible for the widespread anti-debt sentiments, however economically dangerous though those feelings are.

A primary concern of those worried about the national debt is the borrowing cost for the United States (Bivens and Irons). It is argued, correctly, that should a country appear insolvent to investors, occurring when investors feel that a country has no possible way of paying back debt obligations and will thus default on loans, interest rates will rise on government-issued bonds because investors will want a greater reward for risking their money, an occurrence that fits within the definition of capital flight (McLeod). When interest rates on bonds becomes too high, it is extremely difficult for a country to raise money because future interest payments will be large and contribute to deficits and future debt. Essentially, it becomes too expensive for a country to borrow money. This has happened recently to European countries such as Greece, Ireland, and Portugal. Those three countries faced abhorrent interest rates on 10-year bonds (the primary measurement of investor faith in a nation) and couldn’t raise money; instead, they relied on loans and bailouts from the Troika (the European Central Bank, the International Monetary Fund, and the European Commission). Fiscal conservatives – those who advocate lessening government spending in order to bring down deficits and the national debt – rightly don’t want America to follow in the footsteps of the financially doomed European countries. But if we let the market speak, we are not in any danger of that happening – after all, as prominent fiscal conservative Milton Friedman said, “If an exchange between two parties is voluntary, it will not take place unless both believe they will benefit from it.”

Interest rates on 10-year Treasury bills are near historic lows and have been for quite some time, with inflation-adjusted bonds actually carrying a negative interest rate for parts of 2013. This means that investors were paying the US government to hold onto their money. Clearly, investors have faith that the federal government will be able to pay back its dues and is in no immediate threat of becoming insolvent.

Figure 1: Interest rates on the 10-year Treasury bill from 2010 to November, 2013. Source: Yahoo! Finance
As seen by the above chart, the general trend for the interest rate on the 10-year T-Bill has been for it to fall; in fact, since the first week of 2010, the interest rate has fallen almost 29%. The current rise in interest rates has nothing to do with debt levels, but rather the combined effects of a government shutdown, a near breach of the debt ceiling (which would have left the United States unable to repay short-term debt obligations), and a strong stock market rally, encouraging investors to pull money from low-yielding bonds and instead purchase stocks whose potential for high returns is greater. Furthermore, the current interest rate (2.80% at the time of this writing) is well below the 6.77% average yield of the 10-year T-Bill between 1962 and 2012 (based on data from the Federal Reserve). Letting the market speak – as so many fiscal conservatives scream to let happen – simply bolsters the argument that debt is not yet spooking investors: Based on interest rates, investors are more confident in the safety of the United States government’s long term debt obligations than ever before.

When the national debt reached $16 trillion, fiscal conservatives, Republicans, and even some Democrats threw a fit, zeroing in on the number – out of context – to advocate austerity policies. While the number – $16 trillion – is undoubtedly frightful, it is not “too overwhelming to comprehend” (Perry). When put in context, the amount of debt looks much more manageable and even ceases to be an immediate worry, opening the door for discussions about further expansionary policies.

Yes, the US national debt is large, but so is the US economy. To put the national debt into context, one must examine the ratio of the debt held by the public to the gross domestic product (GDP). Economists care about the debt held by the public and not the gross amount of debt because debt owned by the government (for example, in the Social Security trust fund) “does not affect credit markets” (Kogan, et al). Debt held by the public “affects the economy” and “[t]he borrowing associated with that debt competes for capital with investment needs in the private sector…and can affect interest rates” (Kogan, et al). Thus, to create an apt measure of debt that affects credit markets in relation to the size of the economy, economists use the public debt to GDP ratio (PD/GDP). The chart below shows the US debt held by the public as a ratio of GDP throughout the history of the country.

Figure 2: US public debt as a ratio to GDP. Source: The Atlantic
Historically, the United States’ PD/GDP is not at a high – far from it. During the Second World War, the government ran massive deficits and raked up a high debt in order to purchase the necessary military goods. While this contributed to debt, it also created a booming economy that helped the nation recover from the Great Depression and from which decades of prosperity were born. While there is no world war, or total war, for that matter, on which the government can spend money, the same idea of deficit spending would sow the seeds of an economic boom.

In addition to the PD/GDP ratio not being historically bad or dangerous, the United States’ PD/GDP is lower than that of other countries. Germany’s estimated PD/GDP ratio for 2012 is 81.9%; the United Kingdom, 90%; France, 90.2%; Japan, 214.3%. By comparison, that of the United States for 2012 was 72.5%. In relation to these other G-5 countries, the United States is in solid financial standing with regards to PD/GDP, a story that is rarely told. Even Japan, with a PD/GDP of twice its economy, is experiencing near-record low rates on its 10-year treasuries. The same can be said of Germany. Bond vigilantes, “investors who dump a country’s bonds – driving up its borrowing costs – when they lose confidence in its monetary and/or fiscal policies” (Krugman), have yet to attack any of the countries in a worse fiscal position than the United States, suggesting that should the United States’ PD/GDP rise, the country will be on firm financial standing.

Another issue with which conservatives like to threaten the country with is the inevitable difficulty in paying off the national debt. They are right – it would be extremely difficult to pay off over $16 trillion without substantial damage to the economy and years of austerity measures. That being said, the national debt need not ever be paid off entirely, or at all. Debt can continue to grow as long as its rate of growth is less than the rate of GDP growth. Paul Krugman highlights the trivial example in his book End This Depression Now!: The quickest way to lower PD/GDP would be to keep the real value of the debt constant, achievable if the United States were to pay “the value of debt multiplied by the real rate of interest” (Krugman). Using a real interest rate of 2.5% (around the real interest rate prior to the financial crisis) and multiplying it by the debt held by the public, approximately $12 trillion, results in interest payments of $311 billion per annum to keep the real value of debt constant. While that is a substantial amount, it is only 1.94% of a $16 trillion economy. The United States would be put under minimal financial duress to keep the real value of debt constant. As the economy naturally expands, the PD/GDP will fall. The above example highlights the quickest means of lowering PD/GDP; the ratio will fall no matter what as long as real debt growth is lower than real economic growth.

Accepting, now, that debt is not an immediate problem, the conversation ought to turn to creating policies that will promote full employment and economic growth. That, however, has not been done as austerity measures are all the fashion in Washington. Lord John Maynard Keynes stated it best: “the boom, not the slump, is the right time for austerity at the Treasury.” This is due to the fundamental equation in macroeconomics, which says that GDP is equal to consumer spending (C) plus government spending (G) plus investment (I) plus net exports (NX). Austerity measures decrease government spending, obviously lowering the value of GDP. Fiscal conservatives argue that austerity, which includes decreasing government spending, will lead to an increase in consumer confidence and investment (Aslund). Not so. In an economic decline, consumer spending will remain depressed and as long as unemployment remains high, consumer spending will not increase enough to offset a reduction in government spending. Also, investment will not rise because investors will be hesitant about private investment (money going to business allowing them to upgrade infrastructure, etc). Since consumer spending will be muted, there is little potential for increased profits – or even for profits – making an investment into a company rather risky. Hence, many investors will flood the government bond market seeking safe, albeit slimmer, returns. Now that austerity during the slump has been debunked, a quick examination of the below figure explains why expansionary fiscal policy (i.e., a stimulus) is beneficial to the overall economy.

Figure 3: Expanding aggregate demand. Source:
Expanding the aggregate demand, which is equal to the GDP, also makes the GDP greater and boosts employment (Blinder). Given the components of the GDP, and also employment, it is vital to increase recessionary spending to combat the decline in investment and consumer spending, something that can only be done by the government. Those opposed to government spending will turn to the increase of price levels (inflation) caused by said increase of government spending. Though on the surface inflation may appear to be bad, in moderate amounts it actually aids a recovery.
According to Paul Krugman, one of the main problems facing consumers after the Great Recession was private debt. During the boom of 2000s families piled on debt with levels often times higher than incomes. Consumer spending stalled because as people slowly returned to work, wages were used to pay interest rather than to purchase consumer goods. Here’s where inflation comes in. Inflation benefits debtors; it decreases the value of money so after a period of time, say 15 years, the initial amount borrowed is worth less than it was at the time of borrowing. Assuming wage growth keeps up with inflation, consumers will spend a smaller proportion of their income on interest each ensuing year. Therefore, as inflation rises, the burden of debt diminishes and consumers will begin to have the financial means to buy other goods, thereby increasing GDP and allowing the government to curtail spending, which would rein in inflation growth. For all the bad press it gets, some inflation is actually helpful.

Perhaps the biggest impediment to successful implementation of Keynesian economic policies is the accrual of debt that accompanies deficit spending. The actual amount needed to correct a recession is dependent upon the multiplier effect, the expansion of a country’s money supply because of banking (Investopedia), and Okun’s law, which describes the relationship between changes in unemployment and changes in GDP (Okun); but large deficits would be needed, which ultimately will add to national debt. However, the effects of a Keynesian-style expansion ought to be remembered: higher employment, inflation, and GDP growth. These three elements combined, in the long run, work to erase the added debt.
A contributing factor to the accumulation of debt during a recession is the diminishing of the tax base as consumers become unemployed or encounter lower wages. Higher employment has the opposite effect – it widens the tax base, meaning more tax revenue can be collected and the government will have more funds with which to pay interest on debt. Inflation, too, plays an important role when coupled with a larger tax base. As prices rise, wages also rise (ideally in tandem). Higher wages equates to more taxable income across a wider tax base yielding higher government revenue compared to before the recession. GDP helps lower the burden of debt by the aforementioned statement that GDP growing more quickly than debt lowers the PD/GDP ratio and eases the stress of debt. Together, higher employment, inflation, and GDP growth leave a country in a better financial position than before a recession and in a much better position than if austerity measures were implemented.

The purveyance and anti-debt sentiment can be traced back to 2009, beginning with President Obama’s State of the Union address and continuing with the rise of the Tea Party. While the movement has many vocal supporters – whose numerous, and frankly ridiculous, statements and dramatic rhetoric on the subject translated into increased media coverage and the dissipation of beliefs – the national debt of the United States is decidedly a non-issue. The market has stated that it does not believe the United States is at risk of failing to pay obligations, as evidenced by persistently low interest rates on treasury bills. Moreover, the PD/GDP ratio – the amount of debt held by the public divided by the gross domestic product – is neither near record highs nor as bad as other G-5 countries, all of whom are also experiencing near-record low interest rates. The United States’ PD/GDP of around 75% is well below the 90% threshold that many economists believe to be dangerous for economic growth (Kogan, et al). Even another stimulus will not bring the country to that level and if it does, the positive effects of the stimulus will quickly lower the PD/GDP. The benefits of adopting Keynesian-style expansionary policies far outweigh the costs of an immediate increase to debt. Boosting government spending via deficit spending and borrowing will lead to an increase of aggregate demand, raising employment, wages, and GDP, allowing the United States to enter a virtuous cycle of economic growth. Once consumer spending returns to levels capable of driving the economy, the government can implement slight austerity measures to contain a hot economy and to pay down debt.

Debt levels are hefty, but they never need to be repaid. The burden of debt will be eased as long as GDP growth is greater than the growth of publicly-held debt. This means deficits need to be a smaller proportion of the total publicly-held debt than the rate of GDP growth. During a fiscal expansions this will not be the case, but once the economy has recovered due to expansionary policies, deficits can be curtailed and GDP growth will be high. Over time, the PD/GDP ratio will fall and even fiscal conservatives will not be able to use debt as a means by which to win elections.

The above suggestions currently feel unfeasible because of the political and popular climate towards debt. Again, this can be changed either by vocal progressive politicians or by a change of the media. Either will provide the spark needed to burn the incessant and erroneous debt beliefs.
Debt is a tool and must be viewed as such. Without utilizing all financial weapons, the country will inevitably be doomed to years of minimal growth, high unemployment, and low labor force participation. To quote Larry Summers, the Treasury Secretary during parts of the Clinton administration, “[w]e averted Depression by acting decisively in 2008 and 2009. Now we can avert a lost decade by recognizing current economic reality.”

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