Steve Groetzinger: The fallacy of Pedernomics

Regarding the May 11 column “One, big bird-brained election”: Does J. Peder Zane really believe the statistical conclusions he makes up?

Take one example: Zane’s “crushing” $19 trillion U.S. debt load. Sovereign debt, i.e. debt held by countries, is much different from personal or corporate debt. We borrow by issuing bonds and/or printing money.

But for conservatives who insist on using household metrics, the U.S. Debt to Annual Income (GDP) ratio is 1:1 ($19 trillion/$18.1 trillion). How many households could pay off their mortgages, cars and all debt with one year of salary?

I know, GDP is not “national salary,” but such exhibits the fallacy of thinking the country’s finances are like our checkbooks.

The country’s economy is the collateral, not its assets. Sure, debt has its problems, but if we want to reduce U.S. debt appreciably, there are only three places big enough to offer promise: Medicare, Social Security and Defense. Do that too sharply, and we create a recession.

The multiplier effect works in reverse. To fix that, you need a stimulus. Which adds to the debt.

Next time I get 200 words, I will explain, using Pedernomics, how it was the two Reagan terms actually ballooned the debt.

This story was originally published May 24, 2016 at 4:54 PM with the headline "Steve Groetzinger: The fallacy of Pedernomics."