MYTH #2: THE DEFICIT IS OUR BIGGEST PROBLEM
If your credit card company offered you $30,000 interest-free to buy a car, would you take the deal? Sure you would. It's a three-way win: You replace your clunker, the auto industry keeps its assembly lines humming, and the credit card company is happy to have made a safe loan, even at no interest. Apparently, they think you're a pretty good credit risk.
This is pretty much the situation the US government is in now. If our national debt were really at dire and unsustainable levels, as conservative economists and Republican leaders have taken to arguing, nervous investors would be driving up interest rates on federal borrowing. But just the opposite has happened: As I'm writing this, 10-year real treasury yields are at 0.00 percent. The seven-year rate is actually negative. Apparently, the financial markets think we're a pretty good credit risk.
It's true that the United States needs to address its long-term deficit problem—a problem almost entirely due to Medicare and other health care expenditures.
(Domestic, defense, and Social Security spending have actually decreased as a percentage of GDP over the past 40 years, and there's no reason to think that's about to change.)