BY GABE MIZRACHI
Newt Gingrich’s claim to fame is his experience in Washington as Speaker of the House under Bill Clinton. And the heart of his pride is his success in balancing the budget four years in a row. “Balanced budget” is a term thrown around endlessly in politics these days. The concept sounds simple, and indeed it is: revenue equals expenditure. Newt and other Republicans claim that a balanced budget is essential for an improved economy. It sure sounds nice when Newt talks about it, but how evil is debt? Although it would probably be a good idea to lower the deficit from the scary number that it is, owing money isn’t as bad as many people think.
Our current national debt level stands at approximately $15.2 trillion, and contrary to some of the pundits’ arguments, we don’t owe all that money to China. In fact, we owe most of it to ourselves. America owns about 42% of its own debt; this comes from various government bonds and other IOUs. People who have bought government bonds can’t exactly complain about debt because they consciously contributed to it when they bought the bond. This type of debt is not paid off quickly, nor is it supposed to be; it decreases as more bonds mature.
Another fact that is obvious yet essential to understanding debt is that the number 15.2 trillion is a cumulative amount; it measures since the second the United States first borrowed money. Much of the money we owe has simply become irrelevant over the past 235 years. For example, technically we still owe money from the Civil War. At the moment, France isn’t exactly clamoring for that money. We also never paid off our debt from World War II either, and it simply became irrelevant as the U.S. experienced an era of (relative) economic prosperity in the 1950s.
World War II was, in the long run, a necessary war. This brings us to the good debt vs. bad debt part of the argument (that’s right, there is such a thing as “good” debt). On a small scale, an example of good debt is that which accumulates from loans to receive a college education. There is a clear, productive purpose in this effort, so there is a reason to acquire debt. On a national scale, borrowing money to finance public works programs in times of need is not bad either. Bad debt, on a national scale, comes from borrowing for causes with unpredictable, possibly detrimental results; by that I mean you might not get what you pay for. Was the Iraq War a good idea? It’s an argument for another article, but the short answer is: no. The original purpose of finding nuclear weapons turned into an epic fiasco, and the government couldn’t hide that. We borrowed money to aid the cause, of course. An endeavor of such magnitude should have a very certain plan and an almost predetermined result. Borrowing huge sums of money for a war started almost on a whim is indeed a bad idea, especially when the war fails to show a positive outcome.
Debt, if it’s acquired in the right ways and for the right causes, is a very different concept from that which Newt Gingrich conveys. As evidenced by our remaining debt from wars fought in the 19th century, national debt is not like a student owing his friend $1.50 from when he wanted a pepperoni roll from Village Pizza. Governments aren’t quite as obligated to pay back lenders; President Obama doesn’t get phone calls every day from Nicolas Sarkozy saying “You still owe us from Antietam.” Besides, an exorbitant amount of debt provides incentive to get rid of some of it. And many people really do want to work in order to be able to pay their taxes so the government has sufficient revenue to pay off some debt.
