Debt is good...Wait, what?
By Lillian Ji
web posted November 30, 2015
Like how any normal sibling relationship would work, my sisters and I frequently make bargains and barter with one another. If blackmail, trickery, or intimidation didn't work, we could always settle our little issues of covetousness through a bit of haggling--or should I say a lot of haggling? For instance, just a few Sundays ago, I agreed to find my twelve-year-old sister four pieces of debate evidence in exchange for one illustrious piece of hard candy.
So now I owe my sister four pieces of evidence by December 19, and I'm constantly given reminders about this upcoming deadline. Obviously, being in debt to someone is no happy affair. Now imagine if you were an entire country and owed money to dozens of countries and entities. In fact, a 2011 report from The Guardian shows the United States had more than thirty-seven countries and entities holding major portions of its debt. The national debt of America has been a growing concern for years, and it's only growing by the day, as shown by the U.S. debt clock.
Why again did Nobel-prize-winning economist Paul Krugman write an essay titled with the blunt and shocking declaration, "Debt is Good"? The more immediate question at hand would be why an awkward and irreverent teenager like me dares to disagree with such a renowned economist, but let us analyze Krugman's counterintuitive position first. He first notes the inadequacy of America's transportation infrastructure, and says that issuing debt would be a "useful" way to pay for and fix problems such as these. Krugman also discusses how the 2008 financial crisis and the burst housing bubble led to a decrease in the interest rate on the government debt. While low interests may seem to be a positive thing since they encouragement investment, they also encourage investments which may be too risky, and they make it harder for the government to fight recessions. To avoid this problem and raise interest rates, increasing government debt would be a viable solution, says Krugman.
But perhaps Krugman is too concerned with overriding the current overwhelmingly negative perception of government debt to acknowledge that carrying staggering debt also carries staggering consequences if the debt spirals out of control. In his article, he airily dismisses concerns that we'll end up just like Greece, brushing aside the "Very Serious People declaring that we must slash deficits and reduce debt now now now or we'll turn into Greece, Greece I tell you."
I am indeed one of these Very Serious People, and there is nothing wrong with the thinking of us Very Serious People. Krugman cites our transportation infrastructure problems as one of many areas that requires more spending, but has he considered that more spending does not necessarily have to equal more debt? A recent estimate gauges that the U.S. spent $294 billion of taxpayer dollars this year on expired programs, and other reports also list extensive spending on wasteful programs as well. And even if cutting spending in necessary areas did not provide enough funds for necessary expenditures, heavy debt incurs significant interest owed, which further diverts resources toward paying off the debt. It's not simply a matter of not being able to address problems like lacking infrastructure, either--national security, economic security, and innovation would also be hurt. The government can't simply enter a vicious cycle of incurring more debt to pay off existing debt, and so the funds available for private investment and physical capital would decrease. As debt increases, the U.S. would also be more dependent on foreign inflows of capital which would worsen the current trade deficit. (We could actually have a whole other discussion on why trade deficits aren't necessarily bad, but let's just say for now that trade deficits lower the GDP of a nation.)
Of course, we could debate hypotheticals all day long, even while economists don't make very good fortunetellers, but we cannot ignore how the worldwide government debt crisis has recently led to the plunge of the Dow Jones Industrial Average, a major stock market index, by -3.1%, or a crash of 531 points. And yes, we'll very likely turn into Greece, Greece I tell you, because U.S. debt is projected to be 156% of GDP in about twenty-five years, the same debt-to-GDP ratio Greece had in 2012.
Let's not turn into Greece, shall we? And let's not anger my sister, so I'd better get researching for the evidence I owe her. 
This is Lillian Ji's first contribution to Enter Stage Right. © 2015 Lillian Ji