By Chris Satullo
Analogies are a powerful thinking tool. They have the power to explain and foster insight. They also have the power to mislead and spawn damaging errors.
The best teachers and most illuminating writers are often masters of analogy. So are swindlers and demagogues, just as often.
The current manufactured crisis over whether to raise the United States’ debt ceiling is an example of a bad analogy run amok. Combined with toxic partisanship – and some rock-headed behavior on the Republican side of the aisle – one particular off-base analogy threatens to undermine America’s fiscal stability, even crash the global economy.
Here’s the off-base Republican analogy that seems so simple and obvious, but is actually so misleading:
The federal budget is just like your household budget. You can’t keep spending more than you take in.
That second sentence is true for my household, your household, and the household of those other people over there, the ones carrying all those Chick-fil-A bags while they order a bunch of stuff from Amazon on their iPhones.
But here’s the difference between all our households and the federal government: We don’t have printing presses in our basements that can churn out legit American currency any time more funds are needed.
The U.S. government does, in a sense. It’s called the Federal Reserve Bank.
For sure, it can happen that a government might misuse its basement printing press. That can fuel inflation and debasement of the national currency. And, yes, we are having a touch of the former right now, though none of the latter.
That is why the nation has something called a debt ceiling. It’s a limit on how much the U.S. can borrow (i.e. churn out from the printing press). Every year that the federal government spends more money than it takes in from taxes and other revenues, the borrowing needed to cover that annual shortfall (the deficit) pushes the nation a little closer to the debt ceiling.
After three years under the shadow of a pandemic – which first fueled a large recession then necessitated massive spending of borrowed money to pull us (successfully!!!!) out of the doldrums – we have bumped up against the current ceiling a little bit sooner than planned in pre-pandemic times.
Here’s the New York Times explaining the current predicament:
If Congress does not increase the debt ceiling – the limit on money that the U.S. can borrow – the government may run out of money as early as June 1. It would no longer be able to pay its bills, potentially defaulting on its debts. That could send the financial markets, and the economy, into chaos.
Yes, if the world’s richest economy and biggest borrower decided, What the heck, I’ll just become a deadbeat, that would shake things up. And not in a good way.
Back to the aforementioned analogy: It does happen all the time that ordinary American families get overextended – through either unwise decisions, job loss, bad-luck calamity or all of the above – and have to declare bankruptcy. That’s very rough for them, and not great for the entities to which they owe money.
But remember: That’s only became those ordinary American households don’t have that basement printing press.
The government does. With one sane call of the roll in Congress, and one flick of Joe Biden’s pen, the debt ceiling could be raised, the printing press could crank up to speed, and this utterly phony crisis would go away.
But what about the annual deficits, you say? What about the on-going national debt to which the deficits keep adding each year? Aren’t they terrible and dangerous?
Not really. Not yet. A smart national government should run deficits whenever it doesn’t have enough money on hand to meet real and pressing needs, or to invest wisely in infrastructure and in other public goods that will enable the nation to rise to its future.
You don’t want to go crazy with that approach. You can’t have the printing press overheat and break down. Coming out of the pandemic, with inflation rising, the Federal Reserve saw some warning signs that we might be on that path. So, the Fed folks pumped the brakes on borrowing, raising the cost of money. They overdid it a bit, I think. Then again, I don’t have a Ph.D. in monetary policy like a lot of people on the Fed’s staff do.
Main point: The Fed is always on the lookout to keep the printing press from overheating, and it’s got a damn fine 50-year record of preventing that from happening.
But that hasn’t stopped our present-day Republicans from hyperventilating and fomenting a phony crisis which, if not quelled soon, could lead to a real, stuff-your-money-in-the-mattress crisis.
You see, the GOP – even before many of its sane and steady members of Congress were either defenestrated or gave up and went home, leaving its ranks over-populated with nincompoops and insurrectionists – was the Party of Only Two Ideas when it came to the nation’s finances:
Idea 1) When Democrats are in control, deficits and debt are bad. Very, very bad. (When we’re in control, not so much.)
Idea 2) Whoever is in control, because deficits and debt are very, very bad, the only things to do are a) cut spending on programs for the poor and middle class and b) cut taxes for the rich, because they will save us (somehow).
The people who control the GOP House majority these days have no clue how budgets, deficits, debt, or the economy actually work. They are too busy crusading against “woke” and genuflecting to their MAGA lord to bone up on any of that complicated stuff.
But, as a legacy from Grandpa (i.e. Ronald Reagan), they do have at hand the slogans that people smarter than them once used to sell Idea 1 and Idea 2.
As this crisis that’s not a crisis – unless you act on the false belief that it’s a crisis – plays out, here are a couple of other key points to keep in mind to help you pierce the fog:
1) Why does this crop of Republicans want to slash spending on a host of programs? Not because they don’t work, but because they do. Job growth is strong, inflation is declining, the poverty rate is half what it was in 1960, gas prices are way down, clean energy is thriving and, I don’t know what you’re seeing, but I just drove down South for a vacation, and there are construction crews fixing bridges and highways everywhere i.e. the Democrats’ huge infrastructure law at work. The Republicans fear that if word leaks out that government spending actually does helpful things for most Americans, why, their party might actually lose the next election. So they are willing to burn the whole thing down rather than admit that Joe Biden has been proved right about some stuff.
2) It’s funny in a way to hear Republicans fulminating about how debt is the devil’s poison, when the business titans who fund their majority know that taking on as much debt as you can handle – they call it leverage – is a key to striking it rich. In fact, this House majority’s hero, Donald J. Trump, is the absolute king of debt. Anything he’s built, he’s done so mostly with other people’s money – by incurring debt.
3) You know what added as much to the current deficits and national debt as Biden’s generous post-pandemic spending? Trump’s absolutely useless and wasteful tax cut program, which provided the rich with extra money that they, by and large, just pocketed, rather than plowing it back into useful investment. Beyond that, the Republicans want to neuter the IRS, so that their rich patrons never have to pay even the lowered taxes they owe.
To play the household analogy game, Republicans are like a family that would rather cut out vacations, scrimp on medicine, never eat out, and put the dog up for adoption rather than get the boss to pay them what he owes them. The GOP will never admit it, but cutting spending is not the only way to trim deficits and curb long-term debt. It’s just the way that causes the most pain for the most people.
Insisting that the rich and well-off pay their fair share is always a solid option, even if one of our parties refuses to admit it.
If the unthinkable happens, and the U.S. defaults on its debt, amid the smoking wreckage and finger-pointing that will ensue, please remember whom to blame (and tell your friends):
Blame the party that manufactured the crisis for partisan gain. The party that, when it comes to fiscal policy, has been wrong again and again and again about deficits, tax cuts, inflation, you name it.
And the party that has lost the last two national elections (what red wave?), but simply refuses to admit it.
—
Chris Satullo, a civic engagement consultant, is a former editorial page editor/columnist at The Philadelphia Inquirer, and a former vice president/news at WHYY public media in Philadelphia