Combating Disinformation: Debt and Austerity
You’ve almost certainly heard Republicans talk about how the national debt is $36 trillion. $36 trillion! That is horrible, awful, unsustainable! Or is it?
Over the past decade, disinformation campaigns have become increasingly effective at spreading lies. They encourage people to give up fighting for their best interests and instead fight against the made-up problems created to advance an agenda that would otherwise be intolerable to the American public.
If the truth about these issues were widely known, it would lead to the public pushing back against the current administration’s destructive policies. There are far too many lies to cover all at once, so we will start with the nation’s debt and austerity measures.
National Debt
$36 trillion is a large number. Larger than most people can comprehend in relative terms. And yet, the number on its own is meaningless. If someone told you they were $250,000 in debt, are they in trouble? It is impossible to say from that information alone. What matters about debt is the ability to pay it off, not in an instant, but over time.
If that $250,000 debt were incurred by someone who bought a house and took out a thirty-year mortgage while making $140,000 annually, they wouldn’t be in trouble despite being unable to pay off the debt this year, next year, or even ten years from now. They've invested in improving their situation and can afford the monthly payments.
Governments take on debt to invest in the nation and its citizens to create long-term gains. This is especially true during times of struggle, such as the 2008 Great Recession, the Covid pandemic, or the following high global inflation. During these times, governments spend more to keep their economies stable and reduce the hardships created by the crisis.
That doesn’t mean debt is always good or can increase forever without causing issues. While the person above could afford a $250,000 mortgage, they will be denied if they try to take out another significant loan. Lenders look at your ability to pay back your debt before lending you money. Given their current debt payments, that person can’t afford more.
Biden left office with a debt-to-GDP ratio of 122%, meaning America owed 22% more than we generated in revenue the past year. 17 countries have a ratio of over 100%, and Japan has a ratio of ~250%. America’s debt isn’t an immediate concern, and we can afford to take on more of it if we need to, but we shouldn’t do so just because we can. We should reduce our debt while times are good so we have room to take on debt the next time a crisis happens.
Contrary to what you’ve heard, America has reduced its debt—not the dollar value but the debt-to-GDP ratio, which was 133% when Trump left office. GDP growth largely achieved this through investments that brought manufacturing back to the US, increased wages, and added jobs every month of the last four years.
That is what proper investment achieves. It is no different than taking out a mortgage and then increasing your income. You still have the same dollar level of debt, but its impact on your life has lessened.
The opposite of investing in the nation is austerity, severe cuts to government spending often combined with tax increases to reduce deficits and debt.
Austerity Is Bad
Throughout history, nations across the globe have attempted austerity measures to reign in debt. It never goes well. Strict austerity measures cause:
increased unemployment
increased inequality
decreased economic growth
and the most vulnerable members of society suffer the most
When Javier Milei took office in Argentina, he enacted severe austerity measures, which caused unemployment to rise above 50%. By comparison, America’s unemployment hovered around 4% for the last several years.
Inflation in Argentina has remained high, and monetary value has significantly diminished. Pensions have been frozen, aid programs have been cut, infrastructure projects have been canceled, energy costs have risen, and tens of thousands of public employees have been laid off. Sound familiar?
This is why countries don’t make drastic cuts all at once. Instead, you hear about budget changes that will save $1 trillion over the next decade. The aim is to reduce the debt in the long term in a non-disruptive way instead of sledgehammering (or chainsawing it as Milei would prefer) it all in the short term, which creates instability, uncertainty, and hardship.
Milei is a celebrity darling in MAGA circles, and numerous politicians, including Trump, have taken pictures with him. It is no surprise that Republicans exaggerated the danger of America’s debt situation so that they could propose massive cuts to aid programs, education, foreign investment, and more.
But there is a fundamental difference between what the GOP is doing and what Milei did, which makes it even worse: they want to cut taxes along with the budget cuts. That means America will face the problems and hardships of austerity measures without seeing a meaningful decrease in the federal debt.
It is a disinformation scam designed to make working-class Americans support reducing what the government does for them in order to funnel more money to billionaires and corporations. That is the danger of disinformation and why we must fight against it every day.
https://www.theguardian.com/world/2024/sep/27/poverty-rate-argentina-milei
