On the Yahoo! home page I found this headline.
Curious, I thought. Puzzling even. How could that be, when every day we're hearing about the steadily rising national debt? So I had a look at the U.S. National Debt Clock. Sure enough, click on it every two seconds and America's debt notches upward about $100,000. It's now less than 300 billion short of $16 trillion. Recall that just about a year ago there was a showdown over raising the debt ceiling above the statutory limit (at the time) of $14.294 trillion. Last time I checked, $16 trillion was nearly $2 trillion more than $14.294 trillion. So I needed more information. And there, in the story itself, I found the answer.
WASHINGTON (MarketWatch) — Everyone knows America has too much debt. What they don’t know is that things are getting better, not worse.
Little by little, our economy is reducing its debt burden, slowly repairing the damage caused by 10, 20 or 30 years of excess.
If you want to know why economic growth has been so tepid, here’s your answer. Four years after the storm hit, the economy is still deleveraging. And it’s very hard for any economy to grow when everyone is focused on increasing their savings.
Total domestic — public and private — debt as a share of the economy has declined for 12 quarters in a row after surging over the previous decade.
The rapid rise in federal debt over the past four years has distracted us from the big picture. The level of public debt is indeed worrisome, but it’s not as big a worry as the economy’s total level of debt — public and private...
As much as we hear politicians, pundits, tea-party patriots and the Congressional Budget Office obsessing about government debt, it was excessive private debt — not public debt — that caused the 2008 financial meltdown. And it was private debt — some of it since transferred to the public — that lies behind the current European debt crisis. (Greece is unique in having a public sector that ran up spending while its private sector is rather conservative.)
And then I took a look at the author of this MarketWatch story, and suddenly it all made sense. It's Rex Nutting, the journalist who fed the Obama campaign the punch line that Mr. Obama has really been the stingiest of presidents in terms of growth of government spending. He conveniently ignored the fact that the 2009 budget was held for Mr. Obama to sign by the Democrat-controlled congress, ignored that the non-stimulating 'stimulus' was wholly his and his alone, and ignoring the fact that the burst in spending was to be temporary with TARP and the 'stimulus' and should have returned to lower levels in 2010 and 2011 but didn't. Dan Mitchell of the Cato Institute took apart Mr. Nutting's central thesis without even digging in to the politics of the budgets, and there were a host of other valid critiques.
So Mr. Nutting is at it again. It was all about the headline. "U.S. DEBT LOWER!!!" Huzzah! Huzzah! Presto! The Obama campaign, almost miraculously, has a new talking point to throw at the less-informed. But it's private debt - the debt held by private individuals in the private economy - that's dropping. Mr. Nutting buries the data 16 paragraphs into the story.
In the U.S., household debt has now fallen to 84% of GDP from a peak of 98%. Nonfinancial corporate debt has fallen to 77% from a peak of 83%. Financial sector debt has plunged from 123% of GDP to 89%. Public debt has risen to 89% from 56% [of GDP].
The U.S. government debt keeps climbing rapidly, and will soon approach once again a statutory debt ceiling. Private debt, not so much. Well, when people feel economically threatened they retrench - pay down debt, save, spend less. Why would they be economically threatened. Stagnant jobs, falling home equity, falling median income, soaring government debt, future entitlement debt bombs, threats of higher taxes, and continued drunken-sailor spending by our elected officials in Washington. Not to mention soaring energy costs, an anti-business NLRB, and a regulatory regime intent on stepping on the neck of business growth.
So no, although I'm certain that Mr. Nutting's latest venture will be quoted by administration flacks as evidence of the boss's frugality, Mr. Obama doesn't get credit for falling "total" U.S. debt, except to the extent that the stagnant, low growth economy he has engineered is making people worried enough to reign in their personal debt.
For that I'll give credit. You betcha.