Manufacturing Deficit Fear

How about that $14.3tn figure for the debt ceiling? That's a really big number, really scary. So is just about every number connected with the United States budget. We are a huge country with a huge economy. Competent reporters would focus on this being about 90% of US GDP.

Is that big? Well, the debt to GDP ratio was over 110% after the second world war. The United Kingdom had debt to GDP ratios of more than 100% for much of the 19th century, as it was establishing itself as the world's pre-eminent industrial power. Japan has a debt to GDP ratio of more than 220% of GDP and can still borrow in financial markets long-term at interest rates of less than 1.5%.

So, what's the problem? The politicians who want to cut social security and Medicare obviously want the public to believe that there is a huge problem and – due to the incompetence of the media – they have managed to instill fear throughout the nation about this massive non-problem.

If the media were doing their job, the public would be able to put these debt numbers in context. And the politicians who attempted to exploit fears based on ignorance would be subjected to ridicule. For example, when Senator John McCain was basing his 2008 president campaign on attacking the $1m spent on creating a Woodstock museum, competent reporters would have barraged him with questions as to whether McCain understood that this came to 0.00003% of federal spending.

It is also important to keep the Social Security numbers in context. Proponents of cuts to Social Security have spent fortunes on pollsters and focus groups trying to put the program’s finances in the most dire possible light. They are fond of reporting things like the program’s $17.9 trillion shortfall over the infinite horizon.

The focus groups show that this one is really good for scaring people. After all “trillion” is a really huge number and $17.9 trillion must be really really huge. Of course no one has any clue what “infinite horizon” means. So no one knows that this is a projection of what the program looks like in the 23rd, 24th, and 25th century and beyond, if we never change it in any way.

The vast majority of this $17.9 trillion shortfall comes in years after 2200. Social Security does have a long planning period, but if anyone thinks that we are actually making policy for the 24th century then we should keep this person far removed from the levers of power.

Of course the trustees likely anticipated how their report would be received. It is important to recognize that this is the report of the Social Security trustees, not the professional staff of the Social Security Administration (SSA).

The six trustees include three Obama cabinet members, the head of the Social Security Administration, who is a holdover Bush appointee, and Charles Blahous, an independent trustee who was President Bush’s point man on his Social Security privatization drive. The professional staff of SSA does make recommendations to the trustees, but these recommendations are held as carefully guarded secrets, like battle plans in the war on terrorism.