The Des Moines Register reported yesterday, Palin Compares Federal Debt to Slavery at Iowa Dinner. And you may well ask why I care. After all, Sarah Palin is always saying something stupid and she is always somewhere. This weekend, it was Iowa.
But I think it is important. I don’t care about the slavery bit and all her racist talk. What does bother me is this, “Our free stuff today is being paid for by taking money from our children and borrowing from China.” There are two things wrong with this sentence. First: China. It’s been a while since I’ve talked about this, so I think it is worth bringing up again. As I discussed in China Owns America! In Republican Ads, only 32% of our debt is owed to anyone outside the country; only 8% is owed to China. The vast majority of American debt is owed to ourselves.
I see this kind of fear that we are going to bury ourselves in debt—especially from conservatives. But it is based on an extremely poor understanding of finance. Consider this example. When I was 5-years-old, my parents bought a house for $17,000. It is now 44 years later. Imagine that they had kept that house all this time and had only paid the interest on it. Let’s also assume that their mortgage rate was 8%, which is actually kind of high. That would mean that today, they would be paying $113 per month in interest. Clearly, they would be better off having paid off the principle—$113 per month better off. But it’s not the case that they would be buried in principle. What’s more, they would now have a house that is worth about a quarter million dollars.
That brings us to the second problem with Palin’s sentence. We aren’t taking money away from our children by borrowing money today. That is especially true if we are using the money we borrow to invest in infrastructure, health, and education. College graduates are having a hard time finding jobs right now. And that will hurt them into the future. Having a low paying job or no job at all will be a big problem compared to that modest $113 mortgage we are supposedly saving our kids from.
The real concern about our “debt problem” is that in the future, the government will have to raise taxes on the rich. That’s why conservatives care about the issue. But I’m not sure that’s the reason that Palin cares about the issue. She seems more like the base of the conservative movement—someone like Amy Kremer. These kinds of people seem to have just decided to join the conservative movement and so they repeat the talking points without even understanding them. Of course, that makes them really dangerous if they ever get power. You can depend upon someone like Karl Rove to not do anything really crazy. He knows that most of the Republican talking points are nonsense. But if Palin were president, she really would allow the government to default. There would be no convincing here. She believes in conservative principles the same way she believes in Jesus.
Sadly, this is the legacy of the modern Republican Party. And as I’ve written about a lot here, it is wrong to think that a crazy Republican can’t become president. All it takes is a bad economy.