Fox News seized on the Republican Party's attack against the Obama administration regarding the national debt by claiming that "per person debt" in the United States has "jumped nearly $17,000" under President Obama. In fact, Americans' total debt burden has fallen in the past three years.
Steve Hayes Claimed "Per Person Debt" Has "Jumped Nearly $17,000" Under Obama
Fox Panelist Steve Hayes: Debt Jumped "Nearly $17,000 Per Citizen." During a Fox Special Report segment in which anchor Bret Baier referred to the debt clock shown at the Republican National Convention, regular Fox panelist and Weekly Standard columnist Steve Hayes claimed:
HAYES: If you look at per person debt in the United States it's jumped nearly $17,000 per citizen from $35,000 to above $51,000 right now. So I think [Obama] has got a tough record to defend and it's one of the reasons that I think you're going to be hearing about a lot of other issues here. [Fox News, Special Report with Bret Baier, 9/4/12]
Gross Federal Debt Per Person Has Risen Approximately $17,000 Since Obama Took Office. On January 20, 2009, total public debt outstanding was equal to approximately $10.6 trillion. As of August 31, 2012, that figure stood at just over $16 trillion. Hayes presumably got his $17,000 figure by factoring in the U.S. population, which is just over 314 million people, and it works out to $33,700 per person at Obama's inauguration, and $51,000 today -- a difference of $17,300. [Census Bureau, accessed 9/5/12; Treasury Department, accessed 9/5/12]
In Fact, Personal Debt Has Seen Substantial Decline
Bloomberg: "Americans Have Cut Household Debt By $1.3 Trillion Since The Peak In The Third Quarter 2008." From a Bloomberg report on new data from the Federal Reserve Bank of New York:
Consumer indebtedness shrank by $53 billion from the first quarter to $11.38 trillion as of the end of June, according to the quarterly report on household debt and credit released today by the district bank. Delinquency rates for mortgages, credit cards and car loans declined, while rates for student loans and home equity lines of credit rose, the report said.
"The continuing decrease in delinquency rates suggests that consumers are managing their debts better," Wilbert van Der Klaauw, a vice president and economist at the New York Fed, said in a statement today. "As they continue to pay down debt and take advantage of low interest rates, Americans are moving forward with rebalancing their household finances."
Americans have cut household debt by $1.3 trillion since the peak in the third quarter 2008 amid signs of a rebound in the housing market at the center of the 18-month recession that ended in June 2009, according to the report. The lowest mortgage rates on record helped boost the S&P/Case-Shiller gauge of home prices in 20 U.S. cities, which rose 0.5 percent in June from a year earlier for the first gain since September 2010. [Bloomberg, 8/29/12]
HousingWire: "U.S. Consumers Are Holding Considerably Less Household Debt After Spending The Past Four Years Weaning Themselves Off Certain Types Of Loans." From HousingWire:
U.S. consumers are holding considerably less household debt after spending the past four years weaning themselves off certain types of loans, analysts with DBRS said this week.
In the four-year period, stretching from 2003 to 2007, U.S. debt levels increased by 10.2% per year, the ratings firm said.
U.S. household debt peaked in the fourth quarter of 2008 at $12.7 trillion, declining to $11.4 trillion at the end of the first quarter of 2012, DBRS noted. [HousingWire, 8/21/12]
The Fiscal Times: "The U.S. Is Way Ahead Of Other Advanced Industrial Countries" In Cutting Its Debt. In an article headlined "Real Recovery: America's Debt is on the Decline," Merrill Goozner of the Fiscal Times wrote that households debt-to-disposable-income ratio had "a greater reduction than any of the ten largest industrial economies over the last four years." He cited a McKinsey report which said that "at this rate [of debt ratio decline, households] could reach sustainable debt levels in two years or so." [The Fiscal Times, 3/16/12]
MarketWatch: Even Counting Public Debt, "Our Economy Is Reducing Its Debt Burden, Slowly Repairing The Damage Caused By 10, 20 Or 30 Years Of Excess." Rex Nutting of MarketWatch wrote that "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." This includes new federal debt that has come during the Obama administration. Nutter wrote that the rise "in federal debt over the past four years has distracted us from the big picture," saying that "we've lost sight of the progress that's been made in bringing total debt back under control." Nutter went on to write:
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%. [MarketWatch, 6/8/12]
Fox Has Seized On RNC Debt Clock To Further Attacks On Obama Administration
Megyn Kelly: "The GOP Made The Country's Soaring Debt A Key Theme Of Its Convention, Putting The National Debt Clock Center Stage." From Fox's America Live:
MEGYN KELLY (host): Well, the GOP made the country's soaring debt a key theme of its convention, putting the national debt clock center stage. And now it's on track to hit a record $16 trillion today, on the very first official day of the Democratic National Convention. Just to give you some context on that number, with 12 zeros, you would have to spend more than $900,000 every hour since the birth of Christ, in order to burn through $16 trillion. Really? I always get nervous when we try to do math on the show, because it nine times out of 10 turns out to be wrong. But in any event, that's $900,000 an hour for 2012 years. K. [Fox News, America Live, 9/4/12]
Neil Cavuto: "The Treasury Has Just Made This Official ... What We Owe As A Nation Now Going Over $16 Trillion." On his show, Fox's Neil Cavuto stated:
NEIL CAVUTO (host): The Treasury has just made this official, and it does seem a bit ironic on this, the number nerdy show, that we have, according to the United States Treasury, eclipsed the $16 trillion debt level. Collectively, what we owe as a nation now going over $16 trillion. Now Republicans were actually itching for this last week, no doubt, in Tampa. I think politically they were just as happy to see it happen as the Democrats kick off their convention here in Charlotte. ... It would be like spending $907,000 every hour since Jesus Christ was born and you still wouldn't come quite up to $16 trillion. Now the question, Austan, is what you do to get that under control. [Fox News, Your World with Neil Cavuto, 9/4/12]
Sean Hannity: Obama Has "Given Us More Debt Than Any President In The History Of This Country." From Fox's Hannity:
SEAN HANNITY (host): It's interesting how President Obama said about President Bush that he was irresponsible, unpatriotic for four trillion in debt in eight years. He has 5.4 trillion in debt in under four years. That -- 16 trillion, just so you know -- that's $907,000 every hour since Jesus was born. That's a lot of money. And my point is he's given us more debt than any president in the history of this country and he said he'd cut the deficit in half. [Fox News, Hannity, 9/4/12]
But Most New Federal Debt Stems From Pre-Existing Policies
CBPP: "Bush-Era Tax Cuts And The Iraq And Afghanistan Wars" Account For "Almost Half Of The Projected Public Debt In 2019." Chad Stone, chief economist of the Center on Budget and Policy Priorities (CBPP), wrote on the Center's Off the Charts blog that "the economic downturn, the measures enacted to combat it (including the 2009 Recovery Act), and the financial rescue legislation play a smaller role." Stone noted that "[p]ublic debt due to all other factors fell from over 30 percent of GDP in 2001 to 20 percent of GDP in 2019." In other words, without the Bush tax cuts and the two wars, the national debt would be approximately half of what it is today. Note that CBPP is referring to the publically held debt, as opposed to gross debt, which is the figure cited in Fox's debt clock.
The Center's blog post included the following graphic:
[CBPP, Off the Charts, 5/20/11]
Cutting The Deficit Would Have Hurt The Recovery, Job Creation -- Which Economists Argue Should Be The Focus
IMF: "Fiscal Consolidation Typically Reduces Output And Raises Unemployment In The Short Term." From the IMF's 2010 World Economic Outlook:
Based on a historical analysis of fiscal consolidation in advanced economies, and on simulations of the IMF's Global Integrated Monetary and Fiscal Model (GIMF), it finds that fiscal consolidation typically reduces output and raises unemployment in the short term. [IMF, World Economic Outlook, October 2010]
Wash. Post: IMF Paper Shows "Austerity Does Ugly, Ugly Things To A Country's Economy In The Short Term." From Brad Plumer writing at The Washington Post's Wonkblog:
In a new paper for the International Monetary Fund, Laurence Ball, Daniel Leigh and Prakash Loungani look at 173 episodes of fiscal austerity over the past 30 years -- with the average deficit cut amounting to 1 percent of GDP. Their verdict? Austerity "lowers incomes in the short term, with wage-earners taking more of a hit than others; it also raises unemployment, particularly long-term unemployment."
Now, this doesn't mean fiscal consolidation is never worth pursuing. Some countries do run up against unmanageable debt levels. And the IMF cites a number of ancillary benefits that come from reducing deficits, such as lightening the burden from interest payments. But the historical record is clear: Austerity does ugly, ugly things to a country's economy in the short term, which is why the IMF now recommends passing deficit-reduction plans that kick in only "when the recovery is more robust." [The Washington Post, 9/13/11]
Economist Menzie Chinn: "A Front Loaded Fiscal Contraction, Heavy On Spending Cuts" Would Make The "Current US Recovery Worse Than That Of The Great Depression." Comparing the U.S. economy to that of the United Kingdom, University of Wisconsin economist Menzie Chinn wrote on the blog Econbrowser:
[W]e too can make the current US recovery worse than that of the Great Depression; just implement a front loaded fiscal contraction, heavy on spending cuts. Furthermore, in order to maximize the contractionary impact, harass the monetary authorities to tighten policy by inciting fears of high inflation (à la Rep. Paul Ryan), when year-on-year inflation as measured by the personal consumption expenditure deflator is 2.1%. [Econbrowser, 5/3/12]
Robert Reich: "America's Jobs Deficit Continues To Be A Much Larger Problem Than The Budget Deficit." In a February 3 blog post, former Labor Secretary Robert Reich wrote:
When they're not blaming Obama for a bad economy, Republicans are decrying the federal budget deficit and demanding more cuts. But America's jobs deficit continues to be a much larger problem than the budget deficit.
In fact, we can't possibly achieve the growth needed to reduce the budget deficit as a proportion of the total economy unless far more people are employed. Workers are consumers, and consumer spending is 70 percent of economic activity. And cutting the budget means fewer workers, directly (as government continues to shed workers) and indirectly (as government contractors have to lay off workers) and therefore fewer consumers.
Yet deficit hawks continue to circle. [RobertReich.org, 2/3/12]
Economist Betsey Stevenson: "Pursuing Deficit Reduction Given The Current Economic Climate Is Completely Misguided." In an interview with Think Progress, University of Michigan economist Betsy Stevenson stated:
STEVENSON: Pursuing deficit reduction given the current economic climate is completely misguided. We need to be thinking about investing in the future of the country. If we borrow today, if we borrow today and we invest that money wisely, it's going to be cheap to pay it in the future because the economy's going to grow and we're all going to be earning more.
STEVENSON: We need to be saying that there are costs that come with this. It's not a free lunch to cut the debt. It's certainly not a free lunch to cut the debt at a time when we have such high unemployment and we know that there's the potential for us to be in a situation where these workers are never able to get integrated back into our economy. That has big, permanent, long-lasting effects on our productivity, on our overall economy, and if we could spend money now to prevent that from happening, that money will be well-spent. I think there are programs, and I outlined them when I was talking, the President has proposed getting teachers back into the classroom. Why would be reducing spending on education at a time when we need it more than ever? Why would we be cutting important community service positions like firefighters and policemen at a time where, you know, we need those services and people need those jobs? [Think Progress, 8/1/12]
EPI's Lawrence Mishel: Deficit Reduction "Should Be Addressed Once The Recovery Becomes Robust." In a column in The Hill arguing that the "preeminent economic challenge of our time is to generate robust job growth and make sure unemployment drops steadily and rapidly," Economic Policy Institute president Lawrence Mishel wrote: "Any further spending cuts at the federal -- as per the plans by Wisconsin Rep. Paul Ryan (R) or presumptive GOP presidential nominee Mitt Romney -- or at the state or local levels will only exacerbate the problem and slow the recovery or even cause the economy to shrink." Mishel went on to explain that the "best approach" to jobs creation "means having a higher fiscal deficit for a few more years":
This still remains the best approach: Invest in infrastructure and school modernization at a time when savings are ample and interest rates are low. Prevent further cutbacks in needed state and local services that have been slowing the recovery. Maintain safety net benefits such as food stamps and unemployment benefits that help those hurt by the recession and also help boost consumer spending. These create more jobs than other spending at this moment, according to the Congressional Budget Office.
Such a plan necessarily means having a higher fiscal deficit for a few more years. This is necessary to support overall demand in the economy and should be joined by expansionary monetary policy as well. The real deficit problem we face is not from current deficits, which are primarily due to the weak economy and the associated loss in revenues. Rather, our deficit problem is the longer-term rise in healthcare costs and the scaling back of tax rates that have been undercutting revenue. This should be addressed once the recovery becomes robust. We must also do more to strengthen wage growth and improve job quality and security. [The Hill, 7/11/12]
Even Bush-Appointee Ben Bernanke Warned That Cutting Deficit Would Harm The Recovery
Bernanke: Congress Must "Take Care Not To Unnecessarily Impede The Current Economic Recovery." In a February 2 article, The Washington Post reported:
Federal Reserve Chairman Ben S. Bernanke on Thursday cautioned lawmakers against taking any steps that would hurt economic growth as they work to cut the nation's debt, and he defended the central bank's recent actions to support the economy.
In testimony before the House Budget Committee, Bernanke urged Congress to put a priority on finding a sustainable level of federal spending over coming decades.
But, he said, they also must "take care not to unnecessarily impede the current economic recovery." Supporting growth now, he said, "will lead to lower deficits and debt in coming years." [The Washington Post, 2/2/12]