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Home Publications Blogs Beat the Press The Public Fears the Consequences of Going Long Periods of Time Without Eating More Than it Fears Starvation

The Public Fears the Consequences of Going Long Periods of Time Without Eating More Than it Fears Starvation

Wednesday, 25 May 2011 06:50

That is what the Washington Post told readers this morning in an article headlined:

"in poll, debt is scarier than default."

Of course fearing debt more than default makes no sense just like fearing the consequences of not eating more than starvation makes no sense. The government will always have the option to default on its debt. The consequences would of course be enormous, but there is no reason to think that the consequences of default would be greater 10 or 20 years from now. If the public is prepared to default on its debt, it is difficult to see why it would not want to in effect borrow for free for another 10-20 years and then default to its creditors.

As a practical matter, it is obvious that almost no one has any understanding of what default means nor do they have any idea of the size of the debt and its consequences. One of the main reasons for this confusion is that politicians have sought to build up fears about the debt and they have been allowed to do so with the assistance of major news outlets like the Washington Post and National Public Radio.

When politicians (including political figures like Peter Peterson and his employees) make obviously false statements about the deficit and debt these outlets have routinely passed them on to their audience as plausible arguments. They have rarely treated them as gaffes, like for example then Senator Obama's comments about guns and religion during the Pennsylvania primaries.

There has been a serious effort (strongly supported by the Washington Post) to hold teachers accountable for what their students learn. Teachers whose students do not learn are supposed to be fired. By this standard, a high percentage of the reporters and editors who deal with budget issues would be out looking for work today.

Comments (6)Add Comment
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written by frankenduf, May 25, 2011 7:59
not to mention it lays bare the paradigm of corrupt governance- that is, how do you run a system which creates public policy that funnels the vast amount of public resources into very few private hands?- our solution has been the fear based model- once the citizens are scared they are much less likely to protest the gross stratification of our corrupted democracy
written by Eric, May 25, 2011 8:34
We are a democracy and concerns about debt levels are perfectly legitimate. The clear indication here is that discussing the Social Security Trust Fund as an unfunded liability is somehow an exceptional lie. It isn't: it is merely an alternate view of what the nation's future priorities ought to be. Would it make you feel better about it if Pete Peterson simply said that he understands that all that money bought debt to cover future SS funding requirements, but that at this point he thinks using it that way isn't the best plan for the country? The issue is how to allocate present and future revenue streams, and arguing about what others wanted to happen back 25 years ago is pointless. I believe that what was agreed to decades ago remains a sensible plan, but also understand that the SS Trust Fund - similar to any debt - will be redeemed solely from future revenue: it isn't some kind of miracle investment. If Congress sees reasons to modify the system it will be based on current alignment of interests that have darn little to do with the years the surpluses were mostly generated from. I follow the logic of those that think such discussions are misleading, but political decisions are going to be reached on more on the basis that Peterson describes than otherwise. And that is simply because a dollar to redeem the SS Trust Fund is also a dollar for Medicare, education, defense, other debt servicing, etc., etc. Like I said, there is no magic pile of money somewhere giving off electric shocks should non-SS hands reach for it.
written by Jeff Z, May 25, 2011 9:19
The SS trust fund is a special class of bonds, so it represents a from of debt. No one seriously disputes this. On the other hand, it also represents an asset. This asset is difficult to measure in terms of its true benefits since it is a monetary form of 'social capital' that has a tremendous amount of benefits not captured in the size of the current fund, nor necessarily in the future stream of benefits.

The offset for obligations is economic growth. While there are problems with GDP as a measure of well being, it still remains the benchmark. If SS finances grow by 5% over the next ten years, but the GDP grows by 10% over the same period, the actual burden of these debts declines.

Second, the arguments that Eric and Pete Peterson make apply equally well to defense spending, or any other item in the government budget. They all have opportunity costs. A dollar of defense spending is necessarily a dollar that is not available for Medicare or education, and vice versa. It comes down to priorities. Many of the people who whine about the burden of SS conveniently ignore the waste in the current defense budget, or the immense social and economic distress that afflicts many of our fellow citizens.

Butchering Scott's paragraph, but still....
written by diesel, May 25, 2011 2:13
"We are a democracy...........but political decisions are going to be reached on more on the basis that Peterson describes than otherwise."

Precisely why "democracy" should be in quotes.
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About Beat the Press

Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.