The New York Times Keeps Fretting about the "Unsustainable" Federal Deficit

But Agrees that Debt Ceiling Has Got to Go

From time to time I read the discussions on the MMT Economics subreddit. A July 6 post directed my attention to a July 5 New York Times editorial on the "debt crisis". I commented on that editorial, and since my comments echo what we've repeatedly discussed on this Substack blog, I'm posting those comments here in slightly altered form.

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Some things in that Times editorial are the "same old, same old." A few points MMTers would actually agree with. Some are invalid but sufficiently rhetorically potent to require us to step up our game with respect to how we discuss federal deficit spending and the national debt. Some excerpts, with my own comments.

"The United States ... now borrows heavily during periods of economic growth to meet basic and ongoing obligations. It’s increasingly unsustainable."

Deficit hawks and doves always claim that the growing federal "borrowing" is "unsustainable" -- but they never say exactly why it is "unsustainable." Their mode of argument rests on the assumption that the reader will instinctively agree that growing "deficit spending" is "unsustainable" and not question the specifics.

However, we (MMTers) cannot simply note their lack of specificity; we have to challenge the meaning of the term "unsustainable" if we are to have persuasive arguments. (At this point, I'm simply naming that challenge; I'm not attempting a thorough discussion.)

"Over the next decade, the Congressional Budget Office projects that annual federal budget deficits will average around $2 trillion per year, adding to the $25.4 trillion in debt the government already owes to investors."

The Times people here employ the rhetorical technique of invoking what Stephanie Kelton calls the fear of large numbers (meganumerophobia).

The following, however, is a point we have to contend with:

"A mounting share of federal revenue, money that could be used for the benefit of the American people, goes right back out the door in the form of interest payments to investors who purchase government bonds. Rather than collecting taxes from the wealthy, the government is paying the wealthy to borrow their money."

After all, MMTers will characterize interest payments as basic income for people who are already rich. Warren Mosler, for example, states in his White Paper: MMT recognizes that a positive policy rate results in a payment of interest that can be understood as “basic income for those who already have money.” (Accessed July 9 2023.) Back to the Times.

"Before the pandemic, a decade of very low interest rates meant that even as the federal debt swelled, interest payments remained relatively modest. Measured as a share of the national economy, the federal debt was roughly twice as large at the beginning of 2020 as it was at the beginning of 1990, but the burden of interest payments was barely half as large.

"The era of low interest rates has ended, however. The cost of living on borrowed money is rising."

It's unclear how anyone -- whatever their political-economic perspective -- measures "the cost of living on borrowed money." The deficit hawks are not about to try to quantify that as long as they can wield the rhetorical stigma of "living on borrowed money." That being said, the distributional implications of higher interest rates and higher federal debt payments deserve examination.

Some statements in this editorial we can agree with, for example:

"A first step in resetting the conversation is to eliminate the debt ceiling before its next scheduled appearance in 2025."

But the editorial concludes with some classic New York Times on-the-one-hand/on-the-other-hand pearls-clutching.

"Both parties will have to compromise: Republicans must accept the necessity of collecting what the government is owed and of imposing taxes on the wealthy. Democrats must recognize that changes to Social Security and Medicare, the major drivers of expected federal spending growth, should be on the table. Anything less will prove fiscally unsustainable."

But is the Times calling for, say, a single-payer health care system? Given that the U.S. health care system is currently organized around shoveling billions of dollars to insurance companies, Big Pharma and big hospital chains, it is unconscionable for the Times to simply blame Medicare.

"That will require painful choices."

Pain that is not going to fall on the well-paid members of the New York Times editorial board, no doubt.

Share your thoughts in the Comments.