This is a simple but profound observation. Dr. Stein first used it in the context of the long-ago debts and deficits of the Reagan era. “The Federal debt cannot rise forever relative to the GNP. Our foreign debt cannot rise forever relative to the GNP,” he said. “But, of course, if they can’t, they will stop.” It was, as he later wrote, “a response to those who think that if something cannot go on forever, steps must be taken to stop it—even to stop it at once.”4 And he has a point: if something can’t go on, you don’t have to figure out a way to stop it, because it’s going to stop anyway.
Eventually.
As you might have noticed, since he first made the observation, the debt has gone on rising, very dramatically. But the truth is unarguable. If you’re careening along a road toward a collapsed bridge, you’ll certainly stop, one way or the other. But it makes a difference, at least to you, whether you skid to a halt four yards before the cliff edge or whether you come to rest at the bottom of the ravine.
In 2010, Douglas Elmendorf, director of the Congressional Budget Office (CBO), described current U.S. deficits as “unsustainable.”5 On that everyone’s agreed. So let’s make them even more so! On assuming office, President Obama assured us, with a straight face, that his grossly irresponsible wastrel of a predecessor had taken the federal budget on an eight-year joyride. So the only way his sober, fiscally prudent successor could get things under control was to grab the throttle and crank it up to what Mel Brooks in
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“We’ve got a big hole that we’re digging ourselves out of,” the president declared in 2011.7 Usually, when you’re in a hole, it’s a good idea to stop digging. But, seemingly, to get out of the Bush hole, we needed to dig a hole twice as deep for one-and-a-half times as long. And that’s according to the official projections of the president’s economics czar, Ms. Rose Colored-Glasses. By 2020, the actual hole will be so deep that even if you toss every Obama speech down it on double-spaced paper you still won’t be able to fill it up. In the spendthrift Bush days, federal spending as a proportion of GDP averaged 19.6 percent.8 That’s crazy. Obama’s solution was to attempt to crank it up to 25 to 30 percent as a permanent feature of life. That’s load up the suicide-bomber underpants and pass me the matches.
The CBO doesn’t put it quite like that. Musing on the likelihood of a sudden fiscal crisis, it murmurs blandly, “The exact point at which such a crisis might occur for the United States is unknown, in part because the ratio of federal debt to GDP is climbing into unfamiliar territory.”9
But it’ll get real familiar real soon. A lot of the debate about America’s date with destiny has an airy-fairy beyond-the-blue-horizon mid-century quality, all to do with long-term trends and other remote indicators. In fact, we’ll be lucky to make it through the short-term in sufficient shape to get finished off by the long-term. According to CBO projections, by 2055 interest payments on the debt will exceed federal revenues.10 But I don’t think we’ll need to worry about a “Government of the United States” at that stage.
By 1788, Louis XVI’s government in France was spending a mere 60 percent of revenues on debt service, and we know how that worked out for the House of Bourbon shortly thereafter.11
So take your eye off the far prospect, and instead look about fourteen inches in front of your toecap. Within a decade, the United States will be spending more of the federal budget on its interest payments than on its military. You read that right: more on debt service than on the armed services.
According to the CBO’s 2010 long-term budget outlook, by 2020 the government will be paying between 15 and 20 percent of its revenues in debt interest.12 Whereas defense spending will be down to between 14 and 16 percent.
