Fox Previews New Debt Ceiling Fight With Fundamental Misunderstanding Of Debt
Blog ››› ››› ALBERT KLEINE
Fox News discussed the need to raise the debt ceiling by erroneously linking government debt to family debt, a comparison that demonstrates the network's fundamental misunderstanding of the subject.
In an August 26 letter to Congressional leaders, Treasury Secretary Jack Lew indicated that the debt limit would be reached in mid-October. If Congress cannot arrive at an agreement to raise the limit, the United States will be unable to pay for previously agreed upon obligations, such as Social Security and Medicare payments.
On the August 27 edition of America's Newsroom, co-host Martha MacCallum hosted Fox News' Bob Beckel and former George W. Bush staffer Brad Blakeman to discuss the Obama administration's unwillingness to negotiate over raising the limit. During the segment, MacCallum likened government debt to household debt, claiming that if "your daughter runs up the credit card and has access to it and just goes crazy on it ... you're going to say, 'we're going to pay the bill, but we're going to change things in the future.' What is so very difficult about that?"
But MacCallum's analogy of a daughter running up a credit card bill is completely inaccurate.
Nobel prize-winning economist Paul Krugman directly addressed the conservative notion that household debt and government debt are fundamentally the same, claiming that it ignores a few key realities about the nature of government debt. From his 2012 New York Times column:
First, families have to pay back their debt. Governments don't -- all they need to do is ensure that debt grows more slowly than their tax base. The debt from World War II was never repaid; it just became increasingly irrelevant as the U.S. economy grew, and with it the income subject to taxation.
Second -- and this is the point almost nobody seems to get -- an over-borrowed family owes money to someone else; U.S. debt is, to a large extent, money we owe to ourselves.
Economist L. Randall Wray echoed Krugman's analysis in a Huffington Post piece, adding that the federal government has the ability to issue its own currency to pay debts, a fact that further distorts MacCallum's analogy.
Fox's cheerleading for a showdown over raising the debt limit could result in disastrous consequences for the economy. Following the standoff on raising the debt limit in 2011, Standard & Poor's downgraded the U.S. credit rating, and the Bipartisan Policy Center estimated that the delay in raising it "will cost taxpayers $18.9 billion over 10 years."
Fox has repeatedly misled viewers over the debt limit in recent years, erroneously claiming that raising it would be the same as giving the president a "blank check" and obscuring potential negative consequences.