David Brooks Is Upset that the Interest Burden of the Debt Is Near a Post-War Low

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Tuesday, 30 October 2012 04:29

When NYT columnists make absurd assertions they deserve ridicule. In his NYT column today, David Brooks make the absurd assertion that, "the mounting debt is ruinous." Right, and we know this because the interest rate on 10-year Treasury bonds is less than 1.8 percent? (That compares to rates of more than 5.0 percent when we had budget surpluses in the late 1990s.) Do we know that the mounting debt is "ruinous" because the ratio of interest on the debt to GDP is near a post-war low?

interest-per-gdp-10-2012

Source: Congressional Budget Office.

The real story is that the debt is not ruinous except in David Brooks' head. He has no basis for this whatsoever. He is using fears of the debt to try to scare people to support his agenda in the way that others have appealed to racial or ethnic fears.

We have a large deficit because the economy plunged when the housing bubble collapsed. That is the story. The deficits are supporting the economy because the this collapse led to a massive loss of private sector demand. Without the deficit we would simply have lower GDP and higher unemployment, as all the "fiscal cliff" whiners are implicitly acknowledging. This fact is easily demonstrated by looking at the Congressional Budget Office projections from January of 2008 before it recognized the impact of the bubble's collapse.

 

deficits-per-GDP-10-2012

Source: Congressional Budget Office.

There were no big new permanent government spending programs or tax cuts put in place in 2008 or 2009, the deficit exploded because of the economic collapse, end of story. Anyone who says otherwise is trying to mislead people deserves nothing but ridicule and derision.