Opinion: Washington's Mythical Debt Problem

Congressman Mike Kelly is one of the new crop of Republican members of the 112th Congress, and like many of his conservative brethren, he is mad as hell at Washington's profligate and "irresponsible" spending ways and the federal debt. It's precisely Kelly's sort of populist anger that has fueled the Republicans' return to power.

But in a recent appearance on CBS' "Face the Nation," Kelly offered some insight into just how disconnected the debate in Washington about government debt is from reality.

Kelly was asked if he would approve of raising the nation's debt ceiling, which has become a cause celebre for conservative Republicans over the past few months. The debt ceiling is basically a cap on how much money the federal government is allowed to be "in the red." As debt obligations go up, so too must the debt ceiling, which allows the federal government to borrow money in order to fund its operations.

But Kelly wasn't much interested in the specifics or the potentially catastrophic fallout from failing to raise the debt ceiling because, "We've been spending money so long that we don't have." As Kelly also told The Washington Post, in the "real world" where Kelly resides, "people actually have to use their own money to pay for things."

Apparently in the world where Mike Kelly lives, Americans don't take out mortgages to purchase a home or loans to pay for college or invest in a new business, and they don't amass credit card debt. No, in the "real world," Americans pay in cash and never purchase items they can't afford.

Kelly ought to know better. After all, before he became a congressman, he ran an auto dealership in which one of the options for prospective buyers was to finance their car purchases. According to Forbes magazine, the city of Pittsburgh, which abuts Kelly's congressional district, is the 12th most indebted city in America, with an average household credit card debt of $6,690.

And what if Washington had taken Kelly's advice and had not spent money "we don't have," say, to finance the 2009 stimulus package? For one thing, there would be 4.5 million more people living in poverty, according to a report from the Center on Budget and Policy Priorities, and millions more without jobs.

To be sure, borrowing in the "real world" isn't necessarily a good thing, especially if it lets Americans live beyond their means or take on obligations they can't afford. And it's true that in Washington these days, debt financing is being used not to finance investments but just to keep the government operating.

The question then becomes, what to do about it?

Republicans say that the problem is the government spends too much money. But in reality, it's pretty hard to argue that government spending is out of control when Republicans aren't even able to identify a single program to cut.

Almost as soon as they took control of the House, in fact, they cut in half their pledge to reduce government spending by $100 billion. Of course, even $100 billion in spending reductions wouldn't do much of anything to lower a $1.2 trillion federal budget deficit.

What's more, Social Security, Medicare and Medicaid, defense spending and veteran's benefits are all off the Republican's proverbial chopping block -- that's approximately two-thirds of the federal budget right there.

So even if Republicans won't admit it, they implicitly acknowledge that out-of-control spending isn't driving America's debt. Instead it's revenue. And there are only two ways to deal with that issue: grow the economy or raise taxes.

Since raising taxes is off the table (and since interest rates can't go much lower), the most effective long-term debt reduction tool is to grow the economy. Of course, one way way to boost economic growth is to ... increase the government's deficit spending.

That's a hard thing to do when people like Mike Kelly are running Congress.

There is an odd coda to this story; in a recent profile, Kelly mentioned that "at times" he's mortgaged his home to keep his car business alive. Hmm; taking on debt obligations to keep yourself afloat financially -- what a novel concept! If it's good enough for Mike Kelly, shouldn't it be good enough for the rest of us?