Speaker of the House Kevin McCarthy is offering finance lessons online, comparing the United States to an undisciplined child who can’t stop buying things with their parents’ credit card. In the video below — posted as the U.S. debt ceiling showdown looms — McCarthy assumes a soft paternalistic stance with dramatic music in the background. The Speaker says compassionately that he would talk to the wayward child — knock out the problem with reasoned argument.
“You wouldn’t just raise their credit limit,” McCarthy says of the child having trouble curtailing credit card spending. “You’d sit down and help them figure out where they could cut back on spending.”
If you gave your child a credit card and they kept hitting the limit, you wouldn’t just raise their credit limit—you’d sit down and help them figure out where they could cut back on spending.— Kevin McCarthy (@SpeakerMcCarthy) April 15, 2023
The same is true of our debt. Now is the time for a responsible debt limit increase. pic.twitter.com/pW6zIE1e0z
McCarthy has pushed this analogy before, comparing the multi-trillion dollar annual budget and long-term obligations of the U.S. to the kitchen table budgets of a single family households. (The analogy, of course, neglects critical national considerations like defense spending and the government’s ability to raise money by floating bonds, among other things.)
As Economics professor Golnaz Motie told Marketplace in February, the analogy is like apples and oranges. “The government has a lot of obligations that cannot wait. For example, a handbag can wait. But a payment of an employee of the federal government cannot wait,” Motie said.
Still, spending less seems like good advice, at least for those who believe spending cuts are necessary, which includes many on both sides of the aisle.
[NOTE: There is something called Modern Monetary Theory (MMT) that asserts that the U.S. doesn’t really have to control its spending.]
But if MMT is wrong and cuts must be made, then cut what? That’s what retired Foreign Service officer and former US ambassador to Ukraine Steven Pifer asks Speaker McCarthy below. So far McCarthy has been reluctant to say specifically, or to produce a budget that enumerates the cuts he favors.
So, what spending will @SpeakerMcCarthy and @HouseGOP be prepared to cut? https://t.co/OlmksvTUxa— Steven Pifer (@steven_pifer) April 15, 2023
The proverbial child who McCarthy sits down with in his imagined scenario would surely ask which items were outside the budgetary guidelines — is it the new Air Jordans? The killer jeans? Gotie’s handbag?
Just as a proverbial parent sitting with McCarthy might ask: Should NRA subsidies like its tax exempt status be cut out? Or should it be support for Taiwan? Or food stamps? McCarthy chides the U.S. for having the lax fiscal discipline and immaturity of a child, but he’s withholding his advice so far.
Backgrounder: When politicians — and McCarthy is hardly the only one — compare the national debt to a family budget, it can be seen as disingenuous because it oversimplifies a complex issue and misleads people about the nature of government debt.
Einstein’s most famous formula is E = mc2. But he also famously said that things should be “as simple as possible, but not simpler.”
That’s where McCarthy’s oversimplified conflation of the family budget with the national budget loses relevance. It’s simple — but too simple, as Einstein warns against. Consider these five points, generated by A.I., that demonstrate just some of what makes the comparison is misleading.
- Scale: The national debt is much larger than a family’s debt. By comparing the two, politicians can make the national debt seem more manageable than it actually is.
- Income: Politicians often fail to acknowledge that the government has the ability to generate income through taxes and other means, which allows it to borrow and spend more money than a family could. This makes the comparison between the two even more misleading.
- Purpose: Politicians may use the comparison to suggest that the national debt is the result of government overspending, when in fact it is often the result of necessary investments in infrastructure, education, and other public goods. This mischaracterization can lead to misguided calls for austerity measures that can harm the economy and social welfare programs.
- Timeframe: The comparison between the national debt and a family budget ignores the fact that the national debt is accumulated over many years and is repaid over a much longer timeframe. This means that the debt is not necessarily a reflection of current government spending, but rather a reflection of long-term obligations.