Don’t Starve the Nation to Lower the Debt : Budget: We need sensible debate, not apocalyptic projections that lead to gutting our public sector spending.

In a way, many of our political leaders have a lot in common with Calvin Klein: They, too, will go to any extreme to get our attention. When it comes to the nation’s fiscal solvency, for example, we are subjected to terrifying projections of a future in which Generation X and its successors labor as near-slaves, servicing the debt run up by today’s profligate adult population. We’re told that eliminating the federal deficit at once is necessary to our very survival. But before we lose heart completely, let’s at least consider whether the nation’s debt really is our biggest problem and painful austerity really is the solution.

Most of our total debt, of course, is simply money we owe each other--all in the family, so to speak. In fact, $1.9 trillion of the $4.9-trillion federal deficit is money that one part of the federal government owes to another.

This year, Americans will have a combined income of about $7 trillion. Our debts, public and private, will be about $13.5 trillion (split about 60-40 between private and public debt). That’s not small change. But if we imagine ourselves as a family, that ratio of debt to income would not be the end of the world. Many households with mortgages are, in percentage terms, deeper in debt. If we were a company, our credit would still be top flight. And if we had borrowed to finance productive investment leading to greater income later on--like, say, educating our children or building new plants--we’d be “guilty” only of pursuing solid, time-tested financial strategy.

Still, the American family has had an obsession with debt drilled into its psyche--an obsession that intensifies every year, regardless of the growing income base available to service the debt. We’re fixated, all right, but most of us have no intention of curtailing our own spending to reduce debt. And, although only a few people make money out of debt-financed mergers and acquisitions in the business world, no one raises a serious objection to the debt that they are adding to the pile. Most of us, therefore, think that the solution is obvious: The family member that represents all of us, government, should stop accumulating debt altogether.

That’s democracy. But before we place the government in a straitjacket, perhaps we should ask what we will lose when we have immobilized public spending.

The foundation of our economic well-being is that we are an educated nation. Public spending, of course, accounts for most of the education of our population. Public infrastructure, like roads, bridges, water supply and airports is essential to a modern economy. The government also pays for nearly half of the research-and-development investment in the United States, providing not only new technologies but the research labs that underpin overall productivity growth.

If we stop making such investments, we can indeed cut down on the debt that the government issues in the form of bonds (purchased overwhelmingly by the American family as investors, both individual and institutional). We inevitably also would reduce the real economic growth that permits us to service private and public debt. What a deal. It’s like responding to an obsession with fitness and appearance by going on a crash diet--a diet so extreme that it leaves us too weak to work.

Slashing government spending, of course, involves more than abandoning investment in the future; for some, it means real pain now. The public sector, after all, is where we buy other services that, well, make the family a family and not simply a group of strangers. For example, an awful lot of the safety that a family enjoys comes from police and fire departments (not to mention safety frominternational enemies and terrorists). Those of us who are older or not doing so well financially depend on government for everything from health care to food.

Where can we find the models for this sort of emaciated public sector? Take a look at countries that spend much less than we do on public projects to see how they are doing. You’ll find them exclusively in the Third World. No industrialized nation has a smaller public sector than ours.

Of course, our emphasis on debt reduction has some basis in fact. The whole family got out of line during the 1980s, borrowing too much and living beyond its means. It is time to grow up and sacrifice to pay off some of that debt. But we need to mature, as well, in our economic thinking.

Debt is not always undesirable. And obsessing about the national debt is only a way to make bad economic decisions worse. Instead, we should insist on a sensible debate about how to restructure the budget. Let’s get a grip on ourselves before the current drive to reduce public debt result in a classic case of anorexia. A malady, by the way, that might similarly be stimulated by taking Calvin Klein’s advertising a little too seriously.