MUNCIE  — Most every chat I have about the U.S. economy inevitably turns to the size of the national debt. Of course, this used to be an issue that mattered to those who called themselves conservatives, but that was in an earlier, more innocent time. Before I lament the recent dissolution of reason on this issue, it’s important to explain how the debt does and does not matter.

The most dishonest argument about the debt compares government to a business or household. The argument, most famously made by Ross Perot, is both silly and dangerous. It is silly because families and businesses borrow money. Indeed, many financial advisors will say it is wise to borrow money to buy a home that is worth between 2.5 and 3.0 times your family’s annual income. The U.S. has a debt that is about equal to one year of GDP. 

The comparison of government debt to family or household debt is dangerous because it fails to recognize the special role of government. Government provides goods and services that should outlast every household and business. Chief among these is national security, but other examples include an interstate highway system and a public health infrastructure. By their very nature, these investments are lumpy but durable. So, as with the purchase of a home or college education, they warrant taking on debt. 

The real concern with our national debt should devolve to two issues. The first is that too much debt risks slowing economic growth. The second is that the composition of the debt does little to support economic growth. 

A number of macroeconomic studies indict high debt as a factor in slowing economic growth. But, there is little good evidence of a threshold of debt at which growth slows. Japan’s public debt is 2.5 times that of the U.S., and their growth is significantly slower than the U.S., but Singapore’s debt is 50% higher than the U.S., and their economy has been growing briskly. China, which reports very high growth, has public debt far, far worse than the U.S. did at their level of development. Few issues in economics face as much disagreement as the level at which debt is harmful to economic growth, but there is simply no meaningful evidence that we are at such a threshold today. 

The composition of the debt is a more meaningful problem. In earlier times, when the debt was large, much of the spending was concentrated in either wartime spending or stimulus spending that focused on public investments. Sure, there was wasteful spending. All things equal, few things are more wasteful to spend tax dollars on than say, a bomb or land mine. However, our big periods of debt growth accrued to these types of spending, such as defeating the twin evils of Nazism and Communism or the Works Progress Administration. 

This does not mean that military spending or counter-cyclical fiscal policy are beyond criticism. We’ve probably done too much of both, but that is not always apparent in hindsight, much less when staring into the abyss of war or recession. What I do mean is that the biggest policy challenges we have now are not mostly caused by spending to counter recessions or fight wars. Most of the growing debt today surrounds social programs. 

It is not a critique of social programs or anti-poverty measures to note that they don’t typically cause long-term economic growth. We should be paying for them mostly out of current tax dollars, not through borrowing, and yet, that is precisely what we now do. 

That means the real budget problem the U.S. faces is simple honesty about our budgets during good times. Nothing better exemplifies this than the last years of the Obama Administration, and the entirety of the Trump era. In 2009, in the midst of the Great Recession, Congress passed an $856 billion stimulus bill. Most Americans should remember this because it helped birth the Tea Party movement and allowed the GOP to label President Obama as a historically expensive president. Memories are short. 

A decade later, in what President Trump labeled as the “greatest economy in history” Congress passed a spending bill that added more than $1.02 trillion to the debt. So, in a fully recovered economy, in a nation led by a GOP president, with a Senate majority, the U.S. passed a routine spending bill that added more debt than the Stimulus plan in the Great Recession. But there is more. 

In the two previous budgets, in 2017 and 2018, with the GOP holding the Presidency and both houses of Congress, routine budget bills added more than $1.5 trillion to the national debt. This at a time when the president declared the economy was experiencing “all-time highs.” Irony is dead.

The nation’s problem with the debt is not that we occasionally must write a big check to defeat some global despot or help rescue ourselves from an economic downturn or pandemic. The real problem is much simpler. In the best of times, when the party that has long claimed the mantle of fiscal probity has full political power, they wreck the budget. 

The future will soon demand we face this problem head-on. In good times, we are going to have to either cut a trillion dollars of annual spending, or add a trillion dollars of taxes. That won’t cut the debt; it’ll just stop adding to it. We cannot pretend this will be easy, nor do we have to solve all the budget problems right away. We do need a lengthy slew of honesty to arise around the process. 

Conceptually, this is neither novel nor hard. The Bible, in Genesis 41, offers a fairly good example of counter-cyclical fiscal policy. In it, Joseph interprets the pharaoh’s dream of seven lean and seven fat cows as indicating an agricultural cycle. Given power over stores of grain, Joseph put aside a share of the abundant crops in preparation for the lean years. 

Today, the budgetary process is more complex and intertwined than that described in the Old Testament. A robust democracy enjoys a lot more voices and diffuse power than a pharoah’s empire. Still, like Joseph, we could do better at adjusting our budget for the inevitable fat and lean years. But, when it comes to the basics of fiscal policy, it sure seems like someone has been reading the Bible upside down. 

Michael J. Hicks, PhD, is the director of the Center for Business and Economic Research and the George and Frances Ball distinguished professor of economics in the Miller College of Business at Ball State University.