The 6 Biggest Lies About the U.S. Debt

By Arun Gupta, AlterNet
Posted on July 28, 2011, Printed on July 30, 2011

Editor's Note: This article has been corrected to reflect more accurate calculations.

There is one simple truth about the discussion of the looming U.S. debt crisis: it is largely a compendium of half-truths, distortions, myths and outright lies.

For example, is it true that the U.S. debt is unsustainable, which is spurring the budget-cutting fever? Far from it. While U.S. debt is at one of its highest levels ever in terms of gross domestic product, the estimated interest payments for all of 2011 on the $14.3 trillion public debt will be a mere $430 billion. This is only 18 percent more than the $364 billion paid way back in 1998, while the U.S. economy has grown nearly 30 percent since then. Rock-bottom interest rates on U.S. government debt account for the low payments today, but the practical effect is that servicing the debt as a percentage of GDP is near the lowest it’s been in decades.

Or what about hysterical headlines like “U.S. Debt Default Looms” (courtesy of NPR) unless Democrats and Republicans agree to raise the debt ceiling? They are completely untrue. Richard Wolff, professor of economics emeritus at the University of Massachusetts, Amherst, says, if there is no agreement by Aug. 2 to allow the U.S. Treasury to borrow more funds, then “the government instead would choose among cutbacks on various expenditures such as state and local aid, medical aid, for war, for infrastructure. It would extraordinarily unusual for a government in such a situation to attack its creditors.”