“The federal government’s total debt is approaching $18 trillion. Its operating deficit was more than $1 trillion in each of the years 2009-12 and $680 billion in 2013. These numbers are too immense and unfamiliar to be useful. (A trillion is not yet even a standard measure—it means a thousand times a billion in the United States and a million times a billion in much of Europe.) Christopher DeMuth
Christopher DeMuth, National Review, July 21, 2014, p. 28, 29
The federal government’s total debt is approaching $18 trillion. Its operating deficit was more than $1 trillion in each of the years 2009–12 and $680 billion in 2013. These numbers are too immense and unfamiliar to be useful. (A trillion is not yet even a standard measure—it means a thousand times a billion in the United States and a million times a billion in much of Europe.) Better to convert them to portions of the economy and government, so that the current debt is 103 percent of U.S. gross domestic product and the 2013 deficit was 4 percent of GDPand 20 percent of federal spending. These ratios put the dollar figures in perspective. The GDP ratio shows the burden of the debt (a larger economy can afford to borrow more, just as a higher-income family can afford a larger home mortgage), and the spending ratio shows how much of our government we are declining to pay for with our taxes. And they facilitate comparisons over time (effectively adjusting for inflation) and across nations with larger and smaller economies. But ratios are still just numbers: They need interpretation to tell us what they mean for our personal circumstances and those of our government.
We are not getting much help from public officials and policy experts, whose interpretations tend to be abstract and amorphous. The consensus formulation, embraced by President Obama, Speaker of the House Boehner, and the Congressional Budget Office, among many others, is that our current debt and deficits are “unsustainable.” This suggests that they are tolerable for the time being but will need to be reduced by some degree sometime in the future. Such a judgment has the advantage of sounding responsible and admonitory while suiting the short time horizons of democratic politicians and their preoccupation with immediate electoral exigencies.
And they have a point: Why not kick this can down the road? Experts have been warning for decades that our debt and deficits are unsustainable, yet here we are today, out and about and being sustained by an economy and government that continue to chug along even though the debt is bigger than ever. The only debt crises most of us have noticed have been the periodic impasses between the president and Congress over the debt ceiling—the statutory mechanism for enforcing Congress’s second enumerated power (Article I, Section 8 of the Constitution), which is to “borrow money on the credit of the United States.” Recurring annual deficits have obliged the Treasury Department to ask Congress to raise the ceiling a dozen times since 2000, and Congress is always reluctant to recognize the gap between spending and tax revenues that its policies have created. The most recent stand-offs threatened, in July 2011, default on U.S. debt service payments or drastic cuts in government spending, and then produced a two-week government shutdown in October 2013. But Congress invariably resolves these crises by raising the ceiling to make room for additional borrowing, whereupon everyone sighs in relief and gets back to business.
A somewhat edgier formulation of our fiscal situation is that debt and deficits are “robbing our grandchildren.” This is Speaker Boehner’s position today, and it was President Obama’s position when, as a senator, he opposed President Bush’s proposed debt-ceiling increase in 2006—but Obama renounced it when campaigning for his own increase in 2011. It seems to be the position of the opposition party—an attempt to use moral suasion when practical forms of persuasion are unavailable. I think there is much truth in the expression but that it is too broad and rhetorical. When a city sells revenue bonds to finance highway or airport improvements, is it robbing from future generations? The “greatest generation” of Americans that fought and won World War II borrowed hundreds of billions of dollars to do so; was it robbing from the future or securing the future? Continue reading