Reply To: Possible Counterargument to Government Debt Chart


Thanks for the note. A few responses:

(1) I appreciate your concern for privacy, but feel free to post the chart. I have it on my blog etc.:

I also spell it out in a YouTube lecture here:

(2) Your friend (?) is partially right, that so long as government debt/GDP stays put, then we’re not necessarily in a crisis.

(3) However, using income/mortgage as an analogy is bad. For one thing, the federal government doesn’t take in 100% of GDP as tax revenue. For another thing, a mortgage is a secured debt (with the value of the house backing it up). So if your friend had said, “If a brother runs up a credit card debt equal to 100% of the combined income that he and his two other brothers earn,” then yes that would be closer to Uncle Sam’s position right now, and that would indeed be a fiscal crisis.

(4) Your interpretation of my goal is a bit off. I was *not* trying to prove that government debt in the real world is going to lead to a crisis. Rather, I was merely showing that the popular argument–namely, “Gov’t debt isn’t a burden on future generations so long as they hold the debt internally”–is a non sequitur. That’s why I rule out saving and investment altogether, to keep things really simple and isolate the essence of the fallacy.