“Tightening the belt.” It’s a delightfully popular political cliche. Lawmakers on both sides of the aisle like to talk about it, and say that it’s time for government to do it, since American families are.

The problem is, it’s a false analogy. And it’s just one of the many myths about our debt that economist Simon Johnson is busting in his new book, White House Burning: The Founding Fathers, Our National Debt, and Why It Matters to You. He says when it comes to government spending, it is how we spend our money, not how much we spend, that matters.  Here’s his segment with Dylan and the Megapanel of Peter Morici, Imogen Lloyd Webber and Jonathan Capehart from Wednesday:

DYLAN: You say it’s a false analogy, the kitchen table, managing your weekly expenses as compared to the issues of the American government spending is false. Why?

SIMON JOHNSON: Well I think that the fundamental fallacy — which goes back a long way, Thomas Jefferson had the same sort of problems — is that debt is okay at the national level as long as you manage it properly. As long as you know what you’re spending, you have enough revenue to back it, and you use the debt in periods of emergency, such as a massive economic crisis. And then, you control it relative to the size of the economy. Think of it much more like a company than like a family. Companies have debt, that debt lasts for a long time — it’s entirely part of the responsible management of the company.

DYLAN: At the end of the day, there’s a perception that if we simply cut costs and spending, that suddenly we will magically have prosperity. How does — if you have an economy where the banking system is designed to suck money out of your country, not invest in it. Using the credit default swap insurance scam, the trades are rigged in favor of your trading partners to suck money out of your country as opposed to driving money into it, when you look at the tax code which is designed to distort the flow of capital to a very specific group of people and is bought and sold every day in Washington. If you have a rigged tax code, rigged banking system and corrupt trade relationships, how does cutting spending deliver prosperity?

SIMON JOHNSON: Well, it wouldn’t. And it wouldn’t in the American context, and it’s not delivering it in Europe. Europe is in an episode of — some self inflicted, some imposed by the markets, some austerity — those markets are going to have a very hard time for the next half decade at least because of where they’ve gotten to in terms of fiscal policy. We don’t need to go there. We are not Greece, we are not Spain, we are not the United Kingdom. We can handle this in a much more gradual, reasonable and responsible manner. We shouldn’t do percipient spending cuts, as proposed for example by Congressman Paul Ryan.

DYLAN: Peter, go ahead.

PETER MORICI: Well I think that cutting the budget back a bit would be useful. Spending money, you should always do it responsibly and deficit spending has its place. However, deficit spending permits governments to be irresponsible. Look at how the stimulus money was mismanagaed in many cases. The dozen or so energy projects that were destined for bankruptcy before they were ever purchased, like Solyndra and the others. We have to be very careful about how we say that debt is okay, it’s just a manner of managing what you spend. One leads to the other. It’s just a matter of too much debt, does lead to misspending.

DYLAN: Do you disagree with that, Simon?

SIMON JOHNSON: Yes, I do disagree with that actually. I think the fundamental point of more than 200 years of American fiscal history — go back to Alexander Hamilton, go back to the fundamental breakthroughs at the Constitutional Convention when he became Secretary of the Treasury. The premise was, issue debt when you need it. Save it for the emergencies. We’ve had six big debt surges in American history. The first five were wars, the last one was — well, two foreign wars, the Bush tax cuts, and the massive financial crisis. None of those, the previous five ones, led to massive mismanagement of public spending. What’s really changed in recent decades is the tax revolt. A huge shift in the political preferences of the Republican party elite, prioritizing above all else, cutting taxes. The same people that used to care about deficits, they used to care about the national debt. From the late 1970’s they stopped caring about that very much. And the past decade and a half, they didn’t care at all. That is why the debt has gotten out of control.

JONATHAN CAPEHART: Do you think that the frenzy here in Washington to reduce the debt is wrong? And the second question I have, given what you said about Congressman Paul Ryan’s budget that he has put out, how would you grade President Obama and his administration’s plan for reducing the debt?

SIMON JOHNSON: So I think that the frenzy, or the panic as I would call it — the idea that there’s fiscal panic is a problem. I think that is has gone too far, that it’s exaggerated. I think that you should be addressing and adjusting the budget over a two-decade horizon. In our book we proposed bringing down debt to GDP, stabilizing it at 50%, that’s a very aggressive fiscal policy. But it doesn’t involve any Spanish-type austerity. I do think President Obama has a better set of proposals on the table than Congressman Ryan. But, I don’t think he’s serious enough about explaining to people exactly what they’re getting from the government. 40% of all Americans who use Social Security don’t believe they participate in any government program. It’s about the same for Medicare as well. First you have to define what does government do, why does it do it, why do you need social insurance. There was no healthcare available at a reasonable cost for 85 year olds or 95 year olds before Medicare came along. Do you want to go back to that, to pre 1960’s, pre-1930’s? Abolish Social Security, let’s go back to the kind of poverty we had for older people before the Great Depression. I don’t think Americans want to do that. When you put it to them in those terms, they start to understand it, and they start to understand that you need to fund these programs properly to make them robust. But the President has not gone there properly in terms of moving the conversation.

Click here to order Simon Johnson’s new book, White House Burning: The Founding Fathers, Our National Debt, and Why It Matters to You. You can also check out his blog The Baseline Scenario, and follow him on Twitter @baselinescene.