Ben Carson doesn’t understand how the debt ceiling, the budget, or interest rates work
Ben Carson’s accomplishments in the field of medicine should be incontrovertible proof of his intelligence. But read enough of his musings on government spending and the economy, and you’ll find yourself questioning this premise, or perhaps the nature, of intelligence altogether.
The good doctor has consistently shown his lack of understanding of economic matters, and this streak culminated in a disastrous interview with Marketplace on Wednesday. Carson shows a basic misunderstanding of topics a president simply needs to know cold.
The Debt Ceiling: It’s not clear from the interview that Carson even understands what the debt ceiling is. Here’s the exchange between Marketplace’s Kai Rysdal:
Ryssdal: All right, so let’s talk about debt then and the budget. As you know, Treasury Secretary Lew has come out in the last couple of days and said, “We’re gonna run out of money, we’re gonna run out of borrowing authority, on the fifth of November.” Should the Congress then and the president not raise the debt limit? Should we default on our debt?
Carson: Let me put it this way: if I were the president, I would not sign an increased budget. Absolutely would not do it. They would have to find a place to cut.
Ryssdal: To be clear, it’s increasing the debt limit, not the budget, but I want to make sure I understand you. You’d let the United States default rather than raise the debt limit.
Carson: No, I would provide the kind of leadership that says, “Get on the stick guys, and stop messing around, and cut where you need to cut, because we’re not raising any spending limits, period.”
Ryssdal: I’m gonna try one more time, sir. This is debt that’s already obligated. Would you not favor increasing the debt limit to pay the debts already incurred?
Carson: What I’m saying is what we have to do is restructure the way that we create debt. I mean if we continue along this, where does it stop? It never stops. You’re always gonna ask the same question every year. And we’re just gonna keep going down that pathway. That’s one of the things I think that the people are tired of.
The debt ceiling is a strange feature of the American budgetary process. Because the Constitution says that only Congress can incur debt on behalf of the American people, it has to both authorize spending and then authorize the debt to finance all its obligations. Raising the debt ceiling, is therefore, a dangerous political game that the U.S. government plays every few years or so, where the opposition party blasts the party in power’s fiscal irresponsibility, but eventually allows the debt ceiling to be raised because defaulting on your debt for no reason is stupid.
The modern Republican party doesn’t agree with this line of thinking. Many in the party believe that it would be better to default than to incur any more debt at all, and Ryssdal was trying to figure out whether Carson agrees. If Carson truly understood the debt ceiling, there’s a simple answer to this question. He should have just said, “Your question is moot, because when I become president, there will be Republican majorities in Congress, so we will raise the debt ceiling at the same time that we balance the budget.” Instead, he consistently conflated authorizing new spending with raising the debt ceiling.
The Federal Budget: Ben Carson has said that he wants to impose a flat tax on income for all Americans between 10% and 15%. In his interview with Ryssdal, Carson allowed that the rate would initially have to be set closer to 15%. But even a flat tax of 15% would raise the budget deficit by between $1 trillion and $3 trillion over the next 10 years. That’s on top of an already $7.2 trillion cumulative deficit the Congressional Budget Office projects for the next 10 years. In other words, Carson will have to come up with $10 trillion in savings over the next 10 years to reach a balanced budget.
What’s his plan? He told Ryssdal that he will direct every government agency to cut 3% or 4% from its budgets. For that to even come close to closing this $10 trillion hole, that would mean that the 4% figure applies to Social Security (which is 24% of the federal budget) and Medicare payments as well as the military (another 18% of the federal budget). Carson has previously said, however, that cuts to the military are “idiotic.”
Interest Rates and the Federal Debt: Not only did Carson repeat the long discredited idea that government debt above 90% of GDP slows growth, he advanced some strange ideas about why the Federal Reserve raises and lowers interest rates. “You know, one of the things that happens with this level of debt is that it’s very difficult for the Fed to raise interest rates,” he told Ryssdal. He argued that this low-rate environment is a problem because, “Now, poor people and middle-class people really don’t have a mechanism to grow their money.”
The size of the federal debt has no bearing whatsoever on the Federal Reserve’s interest rate decisions. And it’s tough to make money in a savings account because the global economy today is weak and awash with savings. Investors are tripping over themselves to lend money to the U.S. government at negative real rates because there aren’t enough places to productively put money. That’s not the fault of U.S. government policy, and it would be nice if the next president understood that.