Thursday, May 27, 2010

The "Debt Clock" is subterfuge

We've all seen the "Debt Clock." That ridiculous meter of the supposed debt of the United States ticking higher by the millisecond.

The debt clock is a deliberate campaign of misinformation and distortion. It' s designed to scare Americans into voting for reductions in social services that benefit the poor and middle class.

These are the facts:

!. The debt clock presents only the debt and does not show the income and assets of the nation, which far exceed the debt and is growing faster than the debt. GDP alone, which represents the sum total output of goods and services, and national income, per year, exceeds the debt by more than $1.5 trillion.

2. The debt is often shown as equaling $45,000 per citizen, however, the economic output and income of the nation equates to $49,000 per citizen, meaning that households, in the aggregate are solvent and have a positive net worth. That is real wealth!

3. Government spending that adds to aggregate demand raises the economic output of the nation, which raises the wealth of the nation in the form of greater abundance of goods and services ("real wealth").

4. Deficit spending raises the savings of the private sector because it adds to the sum total of financial assets owned by the private sector, and includes an increase in incomes in the form of interest payments.

5. Boom times have ALWAYS followed periods of high deficits and recessions or even depressions have ALWAYS followed periods of surplus. Fortunately, we have not had too many periods of surplus in our 200 year history as a nation.

There is a deliberate campaign of misinformation and distortion going on with respect to the debt. Following the prescriptions of those who are telling us to reduce government spending will ultimately lead to lower GDP and lower wealth and income of the nation and by corollary, a broadening of poverty.

1 comment:

Mike Sandifer said...


Great points. I'd add that the debt clock also fails to take the real value of debt into account, not reflecting an increase in real terms due to disinflation or deflation.