If the debt debate still seems too abstract to follow, maybe that's because it's two sides fighting over the one thing we know least about the economy -- its future
The showdown between Joe Scarborough and Paul Krugman over our debt is interesting and important, not merely as a media skirmish, but also as a keyhole into the way deficit "hawks" and deficit "doves" misunderstand and talk past each other. A great deal of the animosity and confusion between both sides of the debate would be improved with an honest assessment today's economy and tomorrow's debt.
Basically, this is a discussion about (a) what we know about the economy and (b) what we think we know about the economy.
WHAT WE KNOW
Here are six things we know about the economy. We know that unemployment is still high. We know that inflation is low. We know that 4 million people have been out of work, and looking, for more than a year. We know that GDP growth has been fine for normal times, but awfully weak for a recovery following a steep recession. We know that cutting government spending takes money out of an economy. We know that government spending cuts in the last few years have coincided with hundreds of thousands of lost government jobs, which has kept our unemployment rate from falling further.
And here are four things we know about our debt. We know that government borrowing rates are low. We know that global appetite for our debt is high. We know we borrow in our own currency, and not, like Europe, in a common currency that we don't control. And we know that makes us less vulnerable (but not invincible) from a debt crisis.
Out of these ten things we know, how many of them suggest that we should cut our deficits today? Basically, zero. And that's Paul Krugman's point. Everything we know about the economy today provides a clear argument for elevated deficits.
WHAT WE DON'T KNOW
Joe Scarborough understands this. He says he wants higher deficits and a game-plan for cutting our long-term debt (which is the accumulation of our deficits). But he doesn't fully understand -- or properly communicate -- how the argument for long-term debt reduction rests on assumptions about the future that are exquisitely sensitive to change. The precise dimensions of our 2020 debt are calculated from a matrix of variables (e.g. immigration, productivity growth, hospital construction growth, MRI inflation rates) whose very nature is to fluctuate, sometimes dramatically, on a quarterly or annual basis.
Here are four things we think we know about our future debt -- which is almost entirely a health care spending problem. We think we know that the cost of caring for Americans will continue to grow faster than the economy. We think we know that demand for this increasingly expensive care will grow along with our aging boomer population. We think we know that tax revenue will grow about in line with the economy. Thus, we think we know what the gap between future taxes and future spending will be, and how much we have to start saving today to cover it.
It's possible that the deficit hawks have it 100 percent right. But it would also take a rather astonishing clairvoyance for anybody to foresee the next ten years with even slightly useful clarity. Scarborough and Mika Brzezinski often talk about "math" when they talk about debt ...
Childish insults and skewed graphs liberals make up on their mom's PowerPoint does not change reality. Facts-and math-are stubborn things.-- Joe Scarborough (@JoeNBC) February 11, 2013
... and our debt projections look like math, what with all of those numbers. But math is a
law. Actuarial projections are not. They are smart guesswork facilitated by multiplying current trends over many years. There's an important difference.*