BREAKING NEWS: the United States is not broke! We do not have a budget crisis. There’s no need to worry. Everyone can return to their debt-induced coma. Nothing to see here! E.J. Dionne of the Washington Post brought us the good news this morning:
“We’re not broke. Yes, nearly all levels of government face fiscal problems because of the economic downturn. But there is no crisis. There are many different paths open to fixing public budgets. And we will come up with wiser and more sustainable solutions if we approach fiscal problems calmly, realizing that we’re still a very rich country, and that the wealthiest among us are doing exceptionally well.”
Dionne cited Bloomberg Business’ David J. Lynch to support his theory that we’re not in a crisis. Lynch stated, “The U.S. today is able to borrow at historically low interest rates, paying 0.68 percent on a two-year note that it had to offer at 5.1 percent before the financial crisis began in 2007. Financial products that pay off if Uncle Sam defaults aren’t attracting unusual investor demand. And tax revenue as a percentage of the economy is at a 60-year low, meaning if the government needs to raise cash and can summon the political will, it could do so.”
We all know that the ability to borrow is the greatest indicator of financial well-being. If one can borrow enough to buy a big house, they must be doing well. If they can take advantage of Porche’s 0% financing offer and drive the brand new Porsche 911 Turbo Cabriolet, then they’re definitely not broke.
It seems like there are a growing number of people (primarily on the left) that are taking umbrage with the statement, “We’re broke.” Dionne does it in hopes that he’ll convince you that we need to spend more government money to create jobs. Others do it in hopes of securing their re-election.
Dionne (and others) leaves out certain facts that don’t fit their worldview. He cites David Lynch selectively, leaving out statements from Lynch like, “To be sure, the U.S. confronts long-term fiscal dangers. Over the past two years, federal debt measured against total economic output has increased by more than 50 percent and the White House projects annual budget deficits continuing indefinitely.”
Instead of defining our fiscal stability by the amount of debt we can borrow (and at what rate), why not instead define it by how little we borrow, or how much we loan out to other countries? Why do we have to be a debtor nation? Why not become a creditor nation? Why not create a country that lives within our means, rather than having eyes that are too big for our collective stomach?