Dueling deficits: Biden, Trump blast the other’s national debt, but does it even matter?
President Joe Biden and former President Donald Trump criticized each other’s handling of the economy at Thursday night’s presidential debate hosted by CNN in Atlanta.
Biden called out Trump for racking up “the largest national debt of any president in a four year period,” while Trump touted his 2017 tax cuts, saying, “The country was going like never before, and we were ready to start paying down debt.”
Moderator Jake Tapper noted that Biden has run up a $4.3 trillion tab on the national debt during his term, while Trump approved $8.4 trillion in new debt.
Neither candidate appeared to present clear, comprehensible reasons why the other’s debt, taxation and spending negatively affected the economy. But what kind of effect does the national debt even have on the economy at large?
“It’s just not really a problem,” said TCU economics professor John Harvey. “That’s come up as an issue that’s about to destroy our country ever since I can remember.”
He noted that the Biden administration’s economic stimulus payments to help Americans power through the COVID-19 pandemic spurred the economy.
“We just made it up on a keyboard,” Harvey said. “And that’s what the government does, and people find this terrifying, but it’s what the government does all the time.”
The United States can never voluntarily default on the national debt because it can print more U.S. dollars, he said.
While that may be true, it shouldn’t be a license to print money to make debt payments, according to UT Austin economics professor Dirk Mateer.
Interest payments on the national debt are around $870 billion a year, he said.
“That’s bigger than the size of the military, it’s more than Medicare, it’s more than the government spends on education,” he said. “There’s a huge cost in doing this, whether the government can technically default or not, doesn’t matter. What it does is it erodes our ability to grow our economy as fast as we could year after year. We’re just borrowing against the future.”
How the national debt works is largely misunderstood by those in the country who do not dedicate their lives to studying the economy, and many of those people are running the country, according to Stephanie Kelton, an economics professor at Stony Brook University.
“Even at the highest levels of government, people don’t understand monetary operations,” said Kelton, who worked as chief economist for the Senate Budget Committee in 2015. “What most people tend to do is to think of the federal government debt the way they make their own personal debt.”
But the nation’s finances don’t function the same as a household’s, she said. The national debt consists of treasuries, which are owned largely by U.S. citizens.
“I think it just confuses people, because they see the treasury market as a burden. It’s not a burden, it’s our wealth, our savings,” she said. “We don’t owe it. We own it … Their deficits are our financial surpluses. Their red ink is our black ink.”
Kelton agreed with Mateer on the issue of interest payments on those treasuries is a drag on the economy. She recommends getting rid of the treasury market altogether to ultimately phase out that interest burden.
But that’s not something you’re likely to hear from one of these candidates, or any other politician for that matter.
“If they had any idea how it all works, they would be trying to take credit for it, not lay blame, because they’d say, ‘Look, I added more wealth and savings when I was there than you did. I put more dollars into the economy,’” Kelton said.
Debt accumulation, however, must be kept under control so as not to cause inflation, she said. But the takeaway from all the economists who spoke to the Star-Telegram was that the national debt is not as serious a problem as our presidential candidates make it out to be. They don’t even understand how it works, the economists said.
