“Spending-driven debt”

This week, John Boehner started using the phrase “spending driven debt”.  This, to me, is one of the clearest signs as to what the GOP really thinks about debt, and its actually a little refreshing that they’re just coming out and saying it. Debt caused by tax cuts isn’t debt that matters. It’s a great little rhetorical flourish that let’s them simultaneously argue for slashing spending and taxes. But as Ezra Klein notes, “spending driven debt” only accounts for 41% of our debt over the past decade. The single biggest cause of debt was of course the tax cuts.

If you don’t care about debt caused by tax cuts, you don’t care about debt. The only reason anyone ought to care about debt is because, as debt increases, bond holders begin to lose confidence that you’ll be able to pay, and demand a higher interest rate. This increases the governments borrowing costs, and can cause problems if the situation gets out of hand. But these so called “bond vigilantes” don’t distinguish between sources of debt. Debt is debt. And if you look at the yields on treasury bonds right now, they’re low. Negative, in fact. The bond markets are so unconcerned about our debt that they’re willing to pay us to hold onto their money. The bond vigilantes are nowhere to be seen.

Now negative rates probably won’t last, and are most likely a function of “everyone else’s economy is in worse shape” so we’re the only game in town. But even so, if the bond markets were concerned about our debt, it would show up in the yields. And it just hasn’t.

Saying you want to reduce “spending driven debt” is really just supporting austerity measures, and in the GOPs case harsh austerity measures aimed almost entirely at the poor and working class. Austerity now is a terrible idea. According to the bond markets, we do not currently have a debt problem, and to the extent we do have one its largest historical cause is tax cuts and its largest driver today is a slow economy and mass unemployment. We need stimulus now, to get the economy back in gear and people back to work. And we can do it by making long term investments in infrastructure that will improve the country long after the projects end. Couple this with a medium to long term plan to address the structural issues in our budgeting (or to put it more simply, stop fighting dumb wars, raise some revenue in a progressive way, and deal with health care costs) and we should be on track. But austerity now just makes things worse. The bond markets, again, are proof of that. Austerity measures in Europe, every time they were announced, caused spikes in yields as the markets demanded a higher price.

I know this post has been a bit rambling so I’ll stop writing it. Just keep in mind that the GOP does not care about debt. I’ve said it over and over, yes, but I’m going to keep saying it, because apparently they have a lot of people fooled.

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