Decades or centuries from now, scholars will examine U.S. government documents from our time and notice something strange: In four consecutive years around the close of the 20th century, the federal budget was recorded as having a surplus. That hadn’t happened since 1969, it hasn’t happened since, and the way things are going, it may never happen again.
Recent years have seen the collapse of all federal fiscal discipline. At the end of the 2001 fiscal year, the national debt stood at $5.7 trillion. Today, it’s over $12 trillion. With the population at roughly 300 million, your share is, oh, about $40,000.
And you ain’t seen nothin’ yet. In the next decade, according to the Obama administration’s own estimates, Washington will pile up an additional $9 trillion in deficits.
This has been a bipartisan achievement. When Republicans controlled Congress and the executive branch during the Bush administration, the surpluses gave way to deficits.
Now that Democrats are in power, they are doing the same, in spades. Both have found political advantage in lavishing voters with benefits that someone else (future voters) will have to pay for.
Blameworthy as they are, the politicians didn’t do it all by themselves. The recession of 2001 caused revenue to drop and spending to rise, as every downturn does. The much deeper recession that began in December 2007 (and may have ended last summer) had an even greater effect on both.
But on top of that, the Bush administration tried to revive growth with a $168 billion fiscal stimulus last year, as well as the $700 billion Troubled Asset Relief Program. Shortly after Barack Obama took office, he and Congress agreed on another stimulus, this one priced at $787 billion.
All these efforts were attempts to contain the fiscal fallout by averting an even worse contraction, and some of the outlays (especially TARP) undoubtedly were worth the cost. But they also provide cover for politicians to approve spending that stimulates nothing — except the growth of government.
Worse, they accustom our elected officials to abandoning all restraint. The bigger the deficit and the debt, the more pointless it seems to muster the political courage to say “no.”
That sort of fortitude will be especially precious in the coming years, as more and more members of the baby boom generation start collecting Social Security benefits and running up Medicare bills. The Peterson-Pew Commission on Budget Reform recently projected that in the next three decades, given current trends, federal spending will rise to 36 percent of gross domestic product, up from 25 percent today, while revenue will remain below 20 percent of GDP.
In time, the growing gap may cause investors at home and abroad to demand higher returns to justify the risk of something that is no longer unimaginable — a default by the U.S. government. The other day, an official of China’s central bank said pointedly, “The world does not have so much money to buy more U.S. Treasuries.”
It’s a crisis that grew gradually for years and is now growing rapidly. It’s one that will force Americans to choose between getting our fiscal house in order or inviting an economic decline of the sort we associate with banana republics. And it’s one that demands action sooner rather than later.
Right now, we’re aboard the Titanic in a sea of red ink — but we still have a chance to avoid the iceberg that looms straight ahead.
If we hit it, our options will get a lot worse.