This year the federal government is borrowing 41 cents out of every dollar it spends. Instead of saving up for future generations, we’re spending money our offspring haven’t earned yet, and leaving them with nothing but bills and (in the Social Security trust fund) IOUs.
Even the experts admit they have no idea where this tide of red ink could carry our economy. “The United States may be able to issue more debt (relative to output) than the governments of other countries can, without triggering a crisis, because the United States has often been viewed as a ‘safe haven’ by investors around the world,” notes a recent report from the non-partisan Congressional Budget Office.
“On the other hand, the United States may not be able to issue as much debt as the governments of other countries can because the private saving rate has been lower in the United States than in most developed countries, and a significant share of U.S. debt has been sold to foreign investors.”
To paraphrase: Nobody knows how long this can go on. Yet as an economist once said, anything that must come to an end, will. Eventually foreign investors will realize the American government is carrying too much debt, and they’ll stop lending it more money. Before that happens, our leaders need to get spending under control.
Obama has appointed a commission to suggest ways to tame the nation’s deficit. It’s scheduled to report, conveniently, after the November midterm elections. Riedl writes that the commission should recommend that Congress:
Americans are behaving responsibly. We’ve tightened our belts and prepared for an uncertain future. Why can’t government?