EDITORIAL: Think twice before whacking U.S. debt

Elon Musk’s arm must hurt, he’s been ringing the federal debt alarm bell so often and so vigorously.

Recent posts by Musk on X include this:

"A significant % of people don’t even know that there is such a thing as a national debt! Those that do often don’t know how big it is or that our interest payments now exceed what we spend on our military. Only a small % understand that government overspending causes inflation." 

Even the more temperate Jerome Powell, chairman of the Federal Reserve, recently described the mounting debt, now past $37 trillion, in dire terms.

“…the U.S. federal budget is on an unsustainable path,” Powell told the journalist and author Andrew Ross Sorkin. “The debt is not at an unsustainable level, but the path is unsustainable. And we know that we have to change that. We’ve got to get back so that revenues and spending are in better alignment. We don’t need to pay the debt down. We don’t need to balance the budget. We just need the economy to grow faster than the debt, and that’s not happening.” 

A wise and respected local financial adviser who asked not to be named in this editorial points to a Dec. 6 article by Clem Chambers in Forbes Magazine. It’s called "Strange Debt: How I Learned To Stop Worrying And Love The Debt Bomb."

While most of us can agree that our parents were absolutely right in teaching us to avoid debt, Chambers argues (as do others) that the nation isn’t really teetering on the precipice of a financial cliff.

He points out that roughly 70% of the federal debt is owed not to foreign lenders, but to American citizens. That portion thus is an asset rather than a liability.

The local financial adviser offered this perspective: Conservative estimates are that the American people’s total net worth is $140 trillion or more. Even as the national debt approaches $40 trillion, that’s at least a 140 to 40 asset-to-liability ratio, and likely significantly better. Who wouldn't want that?

The wise course is Powell's: Growing the economy to exceed spending, which will include smart spending cuts. 

Keep this in mind when drastic policies are urgently introduced as if life as we know it is about to end because of impending debt-related disaster. That simply is not the case.

And no, this doesn't mean you have to love the debt bomb.