When I teach economics, I try to drive home the lesson that words are supposed to mean something coherent. If you want to be rewarded for stringing together a bunch of empty phrases, you should go take an English class.
I was therefore maximally sympathetic to the poor XM radio host (I think it was Pete Dominick but I’m not sure) who was stuck interviewing a man named John Sakowicz last Friday. Sakowicz, who hosts his own radio show in northern California, was there to warn about the dangers inherent in our growing national debt. He was very clear about this much: the debt and its associated dangers are massive, explosive, perhaps even apocalyptic. He was entire unclear, however, about exactly what those dangers are.
Pressed for an explanation, Mr. Sakowicz rather breathlessly announced that every child born in America today is born with a $45,000 share of the national debt. (He should have said the average child and $45,000 is probably not the right number, but those are minor quibbles). The host, bless him, asked exactly the right question, namely “What does that mean?”. To which Mr. Sakowicz attempted to clarify his meaning by repeating the $45,000 figure in a considerably more agitated tone of voice. To which the host calmly replied: “Okay, but what does that mean?
Take my daughter, for example. Exactly how does this affect her life? Does it meant that she’ll pay that much more in taxes…..or what?”. To which Mr. Sakowicz replied that $45,000 is a really big pile of money.
As an accountant, I have to fall back on what debt really means. Debt by itself doesn't mean anything until you compare it to assets.
What makes personal credit card debt so heinous is that people end up with lots of it with know corresponding asset to show for it.
The fed is no different. I have yet to see a balance sheet of the federal government that lists all the assets owned by the feds; real estate, oil rights, gold reserves, etc.
When taken in this context, the debt may or may not be hideous. However, I'm thinking that along with the 30 trillion in unfunded pensions, social security, and medicare liabilities, I don't believe the feds own 40 trillion in assets.
Thanks reader Tim for the link.