The Public Debate

Steve Ratner is not a simple man. He has a public record of both angelic and devilish behavior. As an angel, he has taken public positions clearly designed to further a general public interest, rather than his private interests, and was instrumental in saving GM and Chrysler, and hundreds of thousands of jobs at a critical moment during the Great Recession. As a devil, he has been heavily implicated, even if not indicted, in his company’s bribing of the corrupt NY Comptroller Alan Hevesy.

This morning, the devilish Ratner made a particularly unfortunate presentation on “Morning Joe,” where he is a regular, and normally quite sensible commentator. He presented charts showing that in addition to the $14 trillion (T) US debt, there are unfunded liabilities through social security and health care totaling perhaps $36T more, bringing total unfunded liabilities to about $50T as compared to a current $16T GNP.

The presentation was unquestionably scary, but in my opinion it was also false, and for reasons I will later provide, irresponsible. What made it false is that (1) it implies a present liability where none actually exists, and (2) vastly overstates the amount.

(1) The additional $36T is a liability only in the sense that you could count the future expenses of any ongoing concern as a liability if you disregard the concern’s revenues. In other words, if you add up all the future expenses of a going concern, you could call that a liability. Ratner has added up all the future social security and medical payment checks that the actuaries think the government will have to write over the next 50 or so years, and calls that the unfunded liability. Of course it’s unfunded: he doesn’t count any revenues. That’s an absurdity, not information.

(2) Moreover, since social security and medical expenses become due over a long period of time, the mathematical total of those payments is not a useful number. Imagine that I owe you $1 million, but pay it to you at the rate of $1 per year. Is my liability really a million dollars, or is it actually the $20 or so I would need to put into a savings account to earn that dollar a year so I could pay it? Obviously it’s the $20 that is the liability, what financial and economic literates like Mr. Ratner call the discounted present value of the amounts to be paid. It’s not the mathematical sum of all those $1 a year payments stretching out over centuries.

Now I come to why I think Ratner’s false presentation was irresponsible. Leave aside my view that any expert who makes a false or seriously flawed presentation of what the expert should know about is being irresponsible, to put it kindly. Here, Ratner has stepped into a volatile public dispute in which one side labors under a tremendous burden of ignorance, and his presentation gives expert confirmation of that ignorance. It’s as if an evolutionary expert gave a presentation appearing to confirm creationism.

In the dispute over the deficit, a large portion of the Republican Party’s base bears this burden of ignorance. These are people who do not themselves know anything about economic or public affairs. Unless they are directly impacted by government action, as when it shuts down, they have no interest, no independent knowledge, and no way to think about such matters. All they know comes through the coordinated propaganda of Fox News, right wing talk radio, fundamentalist clergy, and Republican politicians. Much of that propaganda is deliberately false or deceptive, but the base cannot distinguish between truths and falsehoods in economic or public affairs, and therefore sincerely believes the propaganda.

As a result, many Republicans believe economic absurdities, ranging from the notion that the deficit is the cause of high unemployment to the view that moderately raising taxes on the rich would hurt job creation. These are items of faith or ideology, and not changeable through argument or reason. Nevertheless, there are many other people who may be tempted by the Republican position, and the certainty with which it is advanced. And it is to these folk that Ratner’s presentation does the real harm.

Let me add that the Republican base is not the only one that suffers from great ignorance. Much of the natural Democratic base, like that of the Republicans, lacks knowledge or interest in economic and public affairs, and acts primarily on the basis of personal experience. Since many in the Democrats’ natural base are poor, their personal experience tends to be one of powerlessness. Based on that experience, then, they believe their vote doesn’t matter, and they don’t bother to cast it. In the election of 2010, for instance, the Republican triumphs came about largely because the Republican base voted; the Democratic base did not. As a result, a minority of Republicans nominated the Republican candidates, and a minority of voters elected the winners.