“The US Problem Explained” explained
Everyone on Facebook has been reposting this thing all day:
These numbers show the insignificant effort that Important Government People have made to reduce the amount of the deficit by redisplaying them as if it were a single family’s annual expenses. Great.
This is not the reason why the S&P downgraded the US credit rating, and, if you think that it is, you are part of the problem.
The S&P doesn’t base its rating on how much debt that US has. It all depends on whether the US can pay it back. That we owe so much and are taking insignificant measures toward reducing the ratio of expenditures to income is unfortunate, but it has nothing to do with how investors perceive the value of American debt. So long as they can expect a return on investment, debt will continue to get purchased.
It’s important that we all try to understand how economic institutions work. If we start making demands of our politicians based on faulty information, they’ll hop to it regardless because they are responding to the will of the people. That’s how you end up with a buffet of Republican presidential candidates basing their economic philosophy on Reagan nursery rhymes instead of basic fundamentals.
Do yourself a favor: read everything that Paul Krugman has to say. We’ll be a better country for it. In particular, read this one. Does it not make sense? Ask someone who knows a thing about econ to help explain it. It’s important!
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