Friday, February 11, 2011

National Debt as a Road Trip

Shaulauna recommends this visual metaphor:

I had my doubts before watching it, but I liked it too.

Three caveats.

1) Without a link to the background numbers, it isn’t clear if the author has done the essential things they’re supposed to – like adjusting for inflation, or netting out all national debt that is owed to people who can be taxed by the Federal government. My guess is that he didn’t, since most people don’t with National Debt figures. It’s also not clear if he did the reasonable things like adjusting for size of the economy or size of the population (i.e., why can’t or shouldn’t a bigger richer country have more debt).

2) There is a huge sense in which National Debt is a pointless measure. Looking at debt in isolation from national assets is just asking for trouble. But, national assets are difficult to measure; unfortunately, the response of most people to that fact is to just ignore them completely.

3) By calling this national debt, we miss half the story. Yes, there is a national debt, and it shows up on the liabilities side of the balance sheet if we look at the government as an investment project. But, there is an alternative view of government that we must entertain at the same time. From the perspective of public finance, national debt is like a receivable: it’s a bill that is owed (and which will be paid with taxes) for services that have already been rendered.

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