Tuesday, March 24, 2015

Discussing U.S. Debt in Putin's Newspaper

by Neil H. Buchanan

Having frequently complained about the low quality of the U.S. media (as recently as four days ago, in fact), it is worth pondering whether the media from other countries are equally bad, or worse.  My best interviews have been on the BBC and Al Jazeera, whereas easily the worst interview I have ever seen -- much less participated in -- was on CNN.  (The CNN interview was so bad, in fact, that it was never aired, because the reporter simply did not understand the issue well enough even to ask coherent follow-up questions.)

That most definitely does not mean that all foreign news sources are of equally high quality.  Vladimir Putin apparently imagines the day when a Russia-based news agency will be a significant force in international news coverage.  I was recently contacted by something called Sputnik News.  A very cursory search on the web suggests that this is a recently renamed news agency (formerly RIA Global, or something like that), which clearly intends to hold itself out as a professionally run news source.  It is, however, a creation of the Russian government, so far as I can tell.  For example, when I checked their website a few moments ago, the banner across the top read: "West needs puppet in Moscow to free up Russia's natural resources."  Draw what conclusions you will.

In my case, the issue at hand was not something that Russia or Putin (the two of which might now be functionally the same thing) would seem to care about: the U.S. debt ceiling.  A few days ago, apparently in response to news of the reawakening of the debt ceiling statute,  I received a list of questions from a very nice Sputnik News reporter.  I responded, and some of my answers were included in "Raising US Debt Profitable Economically, Unfavorable Politically - Experts."  It is a very short piece.  For entertainment purposes, if nothing else, I highly recommend reading it.

I should not be too hard on the Sputnik News reporter.  English is not her first language, and she appears to be rather new to her job.  She did not appear to bring any bias to the piece, but rather she had picked up the usual confusions about the debt ceiling. So, for example, after asking, "What are the possible consequences of US Congress not raising US debt ceiling?" her next question was: "Is another shut down looming?"

That confusion is hardly unheard of in the U.S., of course.  Indeed, because the debt ceiling deadline was looming during the October 2013 government shutdown, I ended up writing two Dorf on Law posts (here and here) untangling the differences. (Revealingly, the first of those posts was titled: "What Can We Say About Government Shutdowns That Is Not (Completely) Related to the Debt Ceiling?")  Although the difference between a debt ceiling showdown (constitutional catastrophe) and a government shutdown (policy mess) could not be more stark, even U.S.-based reporters get that one wrong all the time.

The next move was similarly familiar, but more jarring.  After asking about the "extraordinary measures" that the Treasury is now using to avoid default and other reasonable questions, I was surprised that the reporter ended the questions with these two: "What should the US government do to decrease the debt? Is it possible to decrease it at this point altogether?"

Because the level or growth of the debt are really not what is at stake in the debate over the debt ceiling, these questions are really beside the point.  Therefore, I responded by explaining why there is no good reason for the U.S. government (or, for that matter, any well-run business) to try to eliminate or even reduce its debt.  Again, that argument would be the same even if there were no debt ceiling statute, but in this context, it was a point that obviously needed to be made.

To her credit, the reporter responded by changing what was apparently going to be the focus of her story.  What she wrote is really a story about whether debt and deficits are good or bad, not about the consequences of Republican hostage-taking via the debt ceiling, or about President Obama's options if the Republicans fail to increase (or suspend, or repeal) the debt ceiling this summer.  The title of the article itself makes this clear: "Raising US Debt Profitable Economically, Unfavorable Politically - Experts."

What is especially interesting, however, is what the other "experts" said about debt.  After accurately quoting my comments, the reporter quoted an applied economist for the proposition that, "[p]olitically, it is not a good thing to be running up debt on a sustained long-run basis."  Why?  While not quoting her source directly, the reporter descibed the source as saying that raising the federal debt limit is "malpractice."  Note that, if this is an accurate quotation, the source himself confused "debt limit" with "debt," which is a rather revealing error.

But in any event, why would increasing long-run debt amount to political malpractice?  "[B]ecause it allows the political class to borrow and invest funds at present that are not being timely paid for."  Then another direct quote: "They [US government] are getting something supplied but they are not having to pay 100 percent. Somebody else in the future is going to pay for it."

The third "expert" was a spokesman for a right-leaning DC think-tank.  Although his comments were more measured, he argued that it is "probably not" fiscally responsible to increase the debt limit.  Saying that debt accumulation is a bad thing, this supposed expert then said, "We are spending this year, for instance, a half trillion dollars more than we are bringing in in revenues, and that is problem."

The Sputnik News reporter can certainly be excused for not knowing enough about U.S. fiscal policy to follow up on these blatant misrepresentations, but these quotations do tell us that the state of understanding among supposed American experts is shockingly bad.  The quoted economist uses the debt ceiling to rant about "the political class," falling back on the most tired claims about future generations having to pay for the debt.  "They" (the political class) are getting something for nothing.  It is not even, mind you, the recipients of the government programs that are financed by borrowing who are benefiting, but the politicians themselves.  And, of course, it is not even conceivable to the supposed expert that the government can invest funds in a way that pays those future generations in higher incomes and higher revenues.

Meanwhile, the think-tank guy acts as if a $500 billion deficit is still a big thing, when the 2015 deficit (actually projected at $468 billion) is only 2.6% of GDP.  The numbers have come down so dramatically in recent years that the deficit-scold organizations have been frantically issuing press releases saying, as Jonathan Chait described it last fall, "Pay no attention to the falling deficit!"

I pity anyone who tries to understand the U.S. fiscal debate, given how much nonsense is out there.  Economics continues to be used as a way to dress up the most crass anti-government prejudices, and numbers can always be quoted out of context to twist reality.  I guess I will have to satisfy myself that I am on the record saying this: "There is no good economic reason why the debt should not go up."  Well said, Professor Buchanan.  Sure, it is a double negative, but well said.

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