The Audacity of Debt
Comparing today's deficits to those in the 1980s.

At least someone in America is not feeling a credit squeeze: Uncle Sam. This week Congress will vote to raise the national debt ceiling by nearly $ 2 trillion, to a total of $ 14 trillion. In this economy, everyone except the government-leverages.

It's a sign of how deep the fiscal pathologies run in this Congress that $ 2 trillion the federal government will buy only one year before it has to seek another debt-hike conveniently timed to come after the midterm elections. Congress since Democrats began running again in 2007, the federal debt limit has climbed by 39%. The new hike will lift the borrowing cap by another 15%.

There is surely Bipartisan blame for this government debt boom. George W. Bush approved spending increases for Medicare and gigantic bailout. He also sponsored the first ineffective "stimulus" in February 2008, consisting of $ 168 billion in tax rebates and spending that depleted federal revenues in return for no economic lift.


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Democrats ridiculed Mr.. Bush as "the most fiscally irresponsible president in history," but then they saw him and raised. They took an $ 800 billion deficit and made it $ 1.4 trillion in 2009 and perhaps that high again in 2010. In 10 months they have approved more than $ 1 trillion in public spending that has saved union jobs but has done little to assist private job creation. Still to come is the multi-trillion-dollar health bill and another $ 100 billion to $ 200 billion "jobs" bill.

We've never obsessed about the budget deficit, because the true cost of government is the amount it Spends, not the amount it Borrows. Milton Friedman used to say that the nation would be far better off with a budget half the current size but with larger deficits. Mr. Obama and his allies in Congress have done the opposite: They have increased the budget by 50% and the spending financed with ious.

Our concern is that the Administration and Congress view this debt as a way to force a permanently higher tax base for decades to come. The liberal grand strategy is to accidentally use their large majorities this year to pass new entitlements that start small but will explode in future years. U.S. creditors will then demand higher taxes-income taxes back to taking their pre-Reagan rates and adding a value-added tax too. This would expand federal spending as a share of GDP to as much as 30% from the pre-crisis 20%.

Remember the 1980s and 1990s when liberals said they worried about the debt? We now know they were faking it. When the Gipper chopped and business income tax rates by roughly 25% and then authorized a military build-up, Democrats and their favorite economists predicted doom for a decade. The late Paul Samuelson, the revered dean of the neo-Keynesian, expressed the view prevails in those days when he called the Reagan deficits "an all-consuming evil."

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