This is an argument I first heard about from Jack Kemp, Republican vice-presidential candidate in 1996 – namely, that there’s no such thing as too much national debt.
The basic argument is simple: the United States has a fiat currency system, unlike say Greece which relies on external currency (the Euro). Plus, what about inflation? Well, the United States dollar is also the global currency reserve.
The more detailed argument is here by that famously leftwing extremist rag, Forbes Magazine. Quote:
another way to define inflation is to say that the supply of a currency gets out of whack with its demand: too much currency chasing too few people who want to hold it, and so its value drops. Well, when you have the reserve currency, the demand for your currency is always going to be extremely strong. There’s always going to be tons of people, all around the world, who want to use US dollars, because their transactions are conducted in US dollars. (And it’s highly unlikely that this will change soon–being the reserve currency has a network effect, meaning everyone uses the dollar as the reserve currency because everyone else uses it, creating a self-reinforcing cycle that’s extremely hard to break.)
and of course there’s the example of Japan, whose debt is 229% of GDP and yet will never, ever default. Ever. (and their currency isn’t a global reserve currency, either).. link courtesy of that socialist grinder, Business Insider Magazine.
SO, yeah let’s try to get the deficit under control, because after all we are wasting a few hndred billion a year on interest payments that we could be using for better things (like high speed rail, covering the uninsured, R&D for science, etc). But is there a debt crisis? Will we become Argentina or Greece? No. Will China own us? No. Will American civilization collapse? well, maybe, if the fanatics get their wish and enact austerity measures that shrink our GDP and obliterate teh social safety net for our most vulnerable citzens. But that’s got nothing to do with debt.
And will our children pay for the debt today? No. They will be paid – in the form of genuine opportunity for social mobility. Because thats what that debt is doing – paying an investment down, for a better future.
(cross-posted to Dean 2016)