I woke up this morning to Paul Ryan, describing his budget proposal, as quoted in the New York Times: “This is about putting an end to empty promises from a bankrupt government.”
Bankrupt government? Let’s consider this more closely. The normal meaning of bankrupt is negative net worth, as when your liabilities exceed your assets. By this standard, the US government is hardly bankrupt, since it has enormous hard assets and an even larger soft one, the legal right to tax the income, transactions and property of all individuals and organizations subject to US law. We should all be so bankrupt!
So I guess Ryan is not using the normal business meaning of the word. Perhaps for him bankrupt means having negative earnings over some period of time. Here is the federal government’s fiscal record since 1929:
So during what periods has the federal government been “bankrupt”? During every year when outlays exceeded revenues? That would include nearly all of modern history since the 1960s. Or when the fiscal deficit exceeded, say, 5% of GDP? That’s a smaller time frame—basically the past few years since the financial crisis hit and WWII. But if the government is bankrupt now, how bankrupt was it in the days of FDR and the struggle against Germany and Japan? And what does it mean to be bankrupt if the US could be really, really bankrupt in the 1940s and then bounce back to fiscal health almost immediately as soon as the troops came home?
And if the US government is bankrupt today, how come it can raise money at approximately a zero real interest rate?
And on a philosophical level, how does Ryan measure the financial health of government when its purpose is not to make itself rich but to support the prosperity of everyone else?
My translation of the way Ryan uses the word “bankrupt” would be “I want to scare everyone about the current fiscal deficit, and the best way to do it is to use a business-sounding term that has no meaning at all in this situation and hope that the public, and especially the journalists, are too dumb to notice.”