Debunking the “credit card” myth: Don’t fall for this fake message about the debt ceiling crisis

Written by Eric Kleefeld

Research contributions from Gideon Taaffe

Published

With Republicans once again setting the stage for gridlock in Congress over raising the U.S. Treasury's statutory debt limit, and using interviews to push disingenuous analogies comparing the federal government’s budgeting practices to that of an average American household. The real danger is that mainstream media could fall for this misleading comparison and pressure Democrats into enacting painful cuts to popular social programs, while also letting Republicans off the hook for their role in manufacturing this crisis in the first place.

These comparisons between federal and household budgets go back many years, and they ignore some glaring differences: Unlike a household or business, the U.S. government issues its own currency and can roll over its own debt. The political utility of this comparison, however, is that it has enabled conservatives to target social programs, while they avoid answering for their own role in running up the public debt through unfunded tax cuts under Republican administrations.

Deceptive “credit card” analogy distracts from GOP’s role in running up deficits

Speaker of the House Kevin McCarthy (R-CA) appeared on the January 15 edition of Fox News’ Sunday Morning Futures in an interview designed to excuse his party’s role in manufacturing a crisis, by accusing President Joe Biden and Democrats of wasteful spending akin to running up credit card debt.

“So, what I really think we would do is treat this like we would treat our own household,” McCarthy said. “If you had a child, you gave them a credit card, and they kept hitting the limit, you wouldn't just keep increasing it. You would first see, what are you spending your money on? How can we cut items out?”

From the January 15, 2023, edition of Fox News’ Sunday Morning Futures with Maria Bartiromo

House Majority Leader Steve Scalise (R-LA) appeared on the January 22 edition of Sunday Morning Futures and also blamed Biden singularly for the levels of U.S. debt, using the credit card comparison. In outlining this flawed analogy, Scalise also gave away the political game by describing what he thinks should happen next.

“And so what happened is the credit cards are maxed out. That's basically how you hit the debt ceiling. It's the ability to print more money. And that expires when you hit the debt ceiling,” Scalise said. “And so the only way to address it is to control spending or to increase the debt ceiling, or a combination of the two.” (Scalise left out the obvious third possibility — of undoing the Trump tax cuts for the wealthy — while instead pushing an agenda to go after important government programs.)

From the January 22, 2023, edition of Fox News’ Sunday Morning Futures with Maria Bartiromo

Other elected Republicans have continued pushing this deceitful analogy via Fox News, including Rep. Brian Fitzpatrick (R-PA) on the January 22 edition of Fox News Sunday.

As others have pointed out, McCarthy did not have a similar zeal for obstructing routine debt limit increases during the Trump administration, when he voted to extend the debt limit during unified Republican control of government, and later supported a deal between a Democratic-led House and a Republican president to suspend the limit. This all occurred against the backdrop of congressional Republicans helping Trump balloon the national debt and budget deficit through unpopular tax cuts benefiting America's wealthiest families and corporations.

But going beyond the point of hypocrisy, this false comparison enables other bad messaging and both-sides comparisons, which falsely equate congressional Republicans taking the economy hostage through debt ceiling brinkmanship with Democrats opposing the act of hostage-taking.

McCarthy's own “credit card” analogy doesn’t make any sense

Earlier this month on Peacock’s The Mehdi Hasan Show, Stony Brook University economics professor Stephanie Kelton explained why the federal debt ceiling is not remotely the same as a personal credit card limit — and just how nonsensical and potentially catastrophic the whole arrangement really is.

From the January 12, 2023, edition of Peacock’s The Mehdi Hasan Show

STEPHANIE KELTON (ECONOMICS PROFESSOR, STONY BROOK UNIVERSITY): We know that the limit on our credit card is imposed by the lender, right? It’s the lender who says, “I’m going to limit the amount of charges that I’m willing to allow you to put on the card, because I’m worried about your ability to repay the loan.” Now, the debt ceiling limit, who imposes that limit? It is not a lender; it is the borrower itself. It is the federal government, in the form of Congress, that is saying “we are self-imposing this absurd constraint.” Which, as you just said, does nothing to actually constrain spending. All it does is potentially impede the ability of the government to make the payments that Congress has already authorized.

So, the debt ceiling is a form of self-delusion and obviously the kind of thing that periodically takes us to the brink where, you know, we start to wonder whether we’re going to do something unprecedented that could create incredible chaos in the global financial system, which is to actually default on those payments.

MEHDI HASAN (HOST): And the credit card analogy is not just dumb, it doesn't even make sense. Because, what Steve Scalise is saying is, “Don't pay back your credit card bill.” That's essentially what they're saying, if they want to risk a debt default.

Last Thursday on CNN, University of Michigan economics professor Justin Wolfers also explained this distinction. He further added that to the extent that levels of public spending and debt are an issue, McCarthy and other members of Congress are the ones who should be fixing that via normal legislative processes, instead of threatening to “to punch the American people in the face” by defaulting on the government’s bills and inevitably triggering both higher interest rates and higher taxes while undermining the integrity of the entire economy.

From the January 19, 2023, edition of CNN Newsroom

ERICA HILL (ANCHOR): And this something I think that Speaker McCarthy was really looking to do, so he compared the debt limit to a family’s finances saying, “look, Congress at this point can’t just keep raising the government’s credit card limit.” That’s an analogy I think most Americans can understand. And it’s one you called “cute,” but you also said it’s wrong. Why doesn’t that example work here?

JUSTIN WOLFERS (ECONOMICS PROFESSOR, UNIVERSITY OF MICHIGAN): So, it’s wrong because the person who raises your credit card limit is the credit card company, it’s the lender. Speaker McCarthy is part of the government. The government’s the borrower. The only choice the borrower makes — and we all face it every month — is the credit card bill comes due, are you going to pay it or not?

So if Speaker McCarthy wants the U.S. government to spend less money, he needs to pass bills so that we spend less money. But right now, he’s got a credit card bill in the mail and he’s just stomping his feet and saying, “I’m not going to pay it.” This is the part, actually, where it’s a pretty good analogy. Most of your viewers know that’s a pretty bad idea, it’s a pretty good way of getting your credit cut off, raising interest rates. And what that means is if the U.S. government pays higher interest, you and I pay higher taxes.

Former Federal Reserve economist Louise Sheiner, currently a senior fellow at the Brookings Institution, has also explained that the debt ceiling does not accomplish any fiscal restraint in the first place and should be abolished. “The only way to change the level of the debt is to change your tax revenues that are coming in or your spending that's going out, and that requires direct legislation on those elements,” Sheiner told KPCC radio in an interview published January 21. “And I think the evidence suggests that, really, the debt ceiling has not had a disciplinary effect on the budget. It really is used more, I think, as a political football than as a really intentional way of addressing our long-term challenges.”

Mainstream reporters mustn’t fall for the “credit card” analogy

CNN Inside Politics anchor John King ominously said Thursday, “The government’s credit card comes due, and there is no plan to pay it down.” And during a panel discussion, Tia Mitchell of The Atlanta Journal-Constitution claimed that the Biden administration was at risk of losing political support in the country because of it.

“And I think the people at home are looking at Congress — they’re not just looking at the White House, but they’re looking at Congress — and they’re saying, ‘We have to control our spending, because we only have so much we can put on our credit card. You need to do the same,’” Mitchell said. “Republicans understand that, and that’s why they want to have that conversation.”

From the January 19, 2023, edition of CNN’s Inside Politics with John King

About an hour later, CNN hosted Wolfers to explain exactly why the credit card analogy is wrong.

NBC News data reporter Brian Chung also used the credit card analogy Thursday on MSNBC: “Imagine that you have racked up $1,000 on your credit card, but you only have $800 to pay off that bill. That's the limit that we're talking about here. It's a cap on how much the government can borrow to pay its bills for spending that’s already been done, by the way, so it has nothing to do with whether money goes to defense or infrastructure, for example. … If they can’t pay its bills, then maybe they have to cut spending and funding and things like Social Security or Medicare.

From the January 19, 2023, edition of MSNBC’s José Díaz-Balart Reports

NBC News senior Capitol Hill correspondent Garrett Haake also pointed out that congressional Republicans obstruct this purported credit card limit only when there is a Democratic president, not under a Republican. But the discourse is still trapped by this flawed analogy.

Update (1/23/23): This piece has been updated to include additional transcripts.