Republicans are always claiming to be so worried about debt and how much debt the Obama administration is getting us into. Meteor Blades' diary does a good job at explaining who's really at fault for the public debt (don't expect the Republicans to admit it), but like the Republicans, he only addresses public debt.
One of the biggest misconceptions going around these days and one that needs to be hammered home again and again and again: private debt, not public debt, is what got us into this crisis. Yeah, George Bush ran deficits, but our economic recession/depression happened because of private debt bubbles, namely the decade-long housing bubble combined with consumer debt bubbles everywhere. The takeoff in private debt-to-GDP started around 1983.
Understandably, people focus on public debt because it's understood as "all of ours," and therefore "our business". While private debt belongs to "someone else" and "has no bearing on me." This is dead wrong, and the media has done a piss-poor ass job explaining it.
[1] First of all, public debt is not necessarily "all of ours." That depends on who we tax, doesn't it? By taxing the rich 90%, by taxing assets, by taxing estates, by taxing imports from countries that have no labor or environmental standards, that significantly reduces the amount owed by the middle class.
[2] Second of all, private debt affects everyone.
In a million different ways.
If you're worried about the government deficit, well, the government's deficit is the difference between how much it spends and how much it takes in. And both of these are determined by the private economy as a whole. For example, if the private economy is in the dumps, the government has to pay more in unemployment checks. More importantly, if the private economy is in the dumps, the government takes in less as revenues, and this increases the public debt (deficit) faster.
And indeed, the biggest reason why the deficit has increased under Obama has been the collapse in private revenue. That is also why the states are in so much trouble.
But private debt also affects you in other ways. If someone else defaults on a home you want to buy [as happened to my coworker recently] you can no longer buy that house because it's taken over by the bank.
If your employer runs up too much debt and can't pay it, your employer goes bankrupt and you lose your job. If you lose your job, you start spending less, and that means someone else who's income is dependent on your spending loses their job. And so on and so on.
And when you lose your job, and your employer spends less, then you both pay less taxes and that's an even bigger deficit for the federal government.
You see, we're in a fricking economy WHERE EVERYTHING IS RELATED. That's why China's revaluation of the yuan affects an American company that makes things here. That's why Spain's debt crisis affects American stocks. That's why when an American CDO goes under, some fishing village in Norway gets screwed.
The problem is that we're too focused on the politics. It prevents us from seeing that private debt is a national problem.
Your neighbor's debts may not seem like your problem, but a million neighbors who all have debts they can't pay become the federal government's problem, becomes your state and local government's becomes your employer's problem, becomes your problem. This is the national problem that got us into this mess, and the only way out will be to reduce it and ALMOST NOBODY IS TALKING ABOUT IT.
This is what a recession is, people. It is what a depression is. It's a collapse in private sector spending due to private sector over-indebtedness.
No, the Progressive answer isn't "respond to a debt crisis with more debt", it's "respond to a private debt crisis with less private debt, HOWEVER, while this is happening ordinary people who had no hand in this crisis will be suffering, and it's the government's job to step into the breach to avoid a never-ending spiral of debt-deflation.
Of course among all the moaning and wailing about deficits, everyone is missing the point.
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And just How is the private debt doing under Obama?
Ht - Market Ticker
Oh yes, it's GOING DOWN.
It's going down even faster than public debt is going up.
It's going down for the first time since Ronald Wilson Reagan stepped into the Oval Office.
Obama has been reducing the nation's debt where the last 4 Presidents failed.
Tell that to a conservative the next time they bring up "debt".