Total American Debt Reaches 6-Year Low

A blog about business and economics.
Oct. 10 2012 8:53 AM

Total American Debt Reaches 6-Year Low—Why We Should Be Borrowing More

1349873593714

Despite all the talk from politicians about "out of control" federal debt, the truth is that by almost any sensible measure the federal government isn't borrowing enough money. Consider Bloomberg's report that total debt in the United States "has shrunk to a six-year low relative to the size of the economy as homeowners, cities and companies cut borrowing, undermining rating companies’ downgrading of the nation’s credit rating."

Leading the charge, as you can see above, is the precipitous decline in household borrowing. It's hard to see how that could have been avoided, but it takes a big bite out of the economy that needs to be filled by foreign demand (exports), business investment, and government purchases. But of course businesses aren't going to just invest for no reason. They'd be investing either to sell things to households, to foreigners (exports again), or to the government. More aggressive government borrowing could help smooth the situation over either by directly bolstering government purchases, by reducing taxes on debt-constrained households, or by giving grants to state and local government so that they can boost purchases or cut taxes. And rather than "undermining confidence" in a problematic way, sky-high debt would, at worst, undermine the international value of the dollar and bolster exports.

Advertisement

It absolutely cuts against the grain of everything everyone's saying right now, but it's still true. The economy is suffering from insufficient debt, and the only party capable of borrowing enough money at sufficiently low price is the federal government.

Matthew Yglesias is the executive editor of Vox and author of The Rent Is Too Damn High.

TODAY IN SLATE

Sports Nut

Grandmaster Clash

One of the most amazing feats in chess history just happened, and no one noticed.

The Extraordinary Amicus Brief That Attempts to Explain the Wu-Tang Clan to the Supreme Court Justices

Amazon Is Officially a Gadget Company. Here Are Its Six New Devices.

Do the Celebrities Whose Nude Photos Were Stolen Have a Case Against Apple?

The NFL Explains How It Sees “the Role of the Female”

Future Tense

Amazon Is Now a Gadget Company

Food

How to Order Chinese Food

First, stop thinking of it as “Chinese food.”

Scotland Is Inspiring Secessionists Across America

The Country Where Women Aren’t Allowed to Work Once They’re 36 Weeks’ Pregnant

The XX Factor
Sept. 18 2014 11:40 AM The Country Where Women Aren’t Allowed to Work Once They’re 36 Weeks’ Pregnant
Moneybox
Sept. 17 2014 5:10 PM The Most Awkward Scenario in Which a Man Can Hold a Door for a Woman
  News & Politics
Weigel
Sept. 18 2014 3:19 PM In Defense of Congress Leaving Town Without a New War Vote
  Business
Business Insider
Sept. 18 2014 3:31 PM What Europe Would Look Like If All the Separatist Movements Got Their Way
  Life
Outward
Sept. 18 2014 4:15 PM Reactions to a Sketch of Chelsea Manning Reveal Transmisogyny
  Double X
The XX Factor
Sept. 18 2014 3:30 PM How Crisis Pregnancy Centers Trick Women
  Slate Plus
Behind the Scenes
Sept. 18 2014 1:23 PM “It’s Not Every Day That You Can Beat the World Champion” An exclusive interview with chess grandmaster Fabiano Caruana.
  Arts
Brow Beat
Sept. 18 2014 4:33 PM The Top 5 Dadsplaining Moments From The Cosby Show
  Technology
Future Tense
Sept. 18 2014 4:26 PM Global Oceans Break All-Time Heat Record; World on Pace for Warmest Year Ever
  Health & Science
Science
Sept. 18 2014 3:35 PM Do People Still Die of Rabies? And how do you know if an animal is rabid?
  Sports
Sports Nut
Sept. 18 2014 11:42 AM Grandmaster Clash One of the most amazing feats in chess history just happened, and no one noticed.