USA Today published a piece by a really clueless writer, contending that the federal debt is nothing to worry about. Don Boudreaux’s response is devastating:
Editor, USA Today
Dear Editor:
Sally Kohn advises Americans to stop worrying about Uncle Sam's gargantuan debt
("Don't believe the hype about U.S. debt," May 25). But her explanation for why
this debt is benign - namely, that successful private businesses often have high
debt-to-income ratios - is deeply flawed.
First, while private firms do regularly borrow to finance productivity-enhancing
investments, the same isn't true for government borrowing. Owners of private
firms must repay their debts with their own money. Private business owners,
therefore, have much stronger incentives to borrow and invest wisely than do
politicians who repay whatever debts they incur by taxing OTHER people.
Second, Ms. Kohn writes that "The United States generates approximately $14.5
trillion in GDP each year and carries, currently, $14.3 trillion in debt. That
represents a debt-to-income ratio of roughly 1-to-1." Wrong. U.S. GDP is
emphatically not Uncle Sam's income.
U.S. GDP is income earned by, and belonging to, Americans. To get HIS income,
Uncle Sam annually taxes away some of this privately earned income. Uncle Sam's
income is this annual tax revenue - now about $2.2 trillion - and ONLY this tax
revenue.
Even if, contrary to fact, Uncle Sam were powerful enough to confiscate all
$14.5 trillion of Americans' incomes, it's as ludicrous for Ms. Kohn to count
Americans' entire incomes as income belonging to Uncle Sam as it would be for me
to count my neighbors' entire incomes as income belonging to me simply because I
might be powerful enough to confiscate these incomes in full.
Sincerely,
Donald J. Boudreaux
Professor of Economics
George Mason University
