Budgetary experts have been promising us a future “crisis” related to the national debt for years, and in some instances, decades. If you’re reading this, you likely know some of their names: MacGuineas, Riedl, Galston, Bourne, Boccia, Jenkins, Rampell, and even Musk. To say the list is truncated insults understatement. Without much exaggeration, you could fill a Rose Bowl with all the economists, pundits and politicians who’ve long associated “national debt” with “disaster” and “crisis.”
The unfortunate news for the myriad predictors of doom is that they’re incorrect. That’s not an opinion, it’s just a comment that markets are efficient, brutal, and always forward looking: looking into the future, the markets for the most owned income streams in the world (Treasuries) are not forecasting what the experts have forecasted, and will continue to.
In truth, and as expected, as the size of the national debt has risen, interest rates on that same debt have declined. This trend will continue precisely because the experts continue to focus on the size of the debt, as opposed to why the debt is so sizable. There’s a crucial difference.
By producing endless forecasts promising disaster ahead because of the size of the national debt, they blithely ignore the soaring tax revenues now and in the future that enable all the borrowing. There’s your crisis: copious amounts of wealth extracted in taxes, amounts that will grow so much in the future that as George Will recently wrote in pessimistic fashion, the ability of Treasury to run up quite a bit more debt in the future “probably will accelerate.” Yes, it will. What takes in a lot of tax revenue, and is expected to take in a lot more tax revenue in the future, can borrow with ease and in growing amounts.
The debt is a symptom of a too much revenue problem, which means the true crisis is that there’s no debt crisis, and there’s no debt crisis because investors with real skin in the game know that Treasury’s incomings are small relative to what they’ll be. Will has acknowledged the argument made here, while disagreeing with it. Other alarmists don’t acknowledge it, and surely won’t debate it.
Still, Will might individually see the positives inherent in his national debt pessimism. In a recent Washington Post column titled “The Nation’s accelerating self-assassination,” he lamented a forecast from the Congressional Budget Office (CBO) “that in 10 years, the nation will annually be spending more than $2 trillion (two thousand billion) just on debt service, which already is the fastest-growing part of the budget.” Except that what Will writes is bullish, particularly given his longstanding disgust for a Congress that refuses to operate within constitutional limits. Problem solved.
Will adds near column’s end that “The higher the national debt as a percentage of GDP, the less leeway government has to respond to recessions or other economic shocks.” Which might be the most bullish sentence ever written in any opinion piece.
If you’re confused, just ask ChatGPT, Claude, or Grok what Presidents with names like Hoover, Roosevelt, Bush, and Trump did in response to “recessions or economic shocks” in 1929, the 1930s, 2008, and 2020. Don’t look now, but Congress may have unwittingly solved the “do something” problem that has cruelly elongated downturns, or created crises where there were none.
Having solved that, we can perhaps next pivot to the real crisis, which is that there’s no debt crisis. More challenging is that this crisis is unseen. How to measure all the progress not happening due to enormous tax collections that the national debt is but a symptom of?