There’s been some chatter about the partisanship of concerns about the federal debt recently. Debt is fine if the party you prefer is in control, but otherwise is bad it seems.
It doesn’t help that the only mention of “deficit” in President Trump’s State of the Union speech last night had to do with trade deficits rather than the deficits that have been accruing during his administration. A couple of pieces this week (here at Public Discourse and here at Acton Commentary) hopefully point to the bipartisan nature of our current debt crisis in America. My goal is to highlight to the breadth and depth of the problem. In short, the challenge is not merely political but deeply pervasive. And it is not just passing, but perennial.
The ways governments have previously dealt with debt crises include default, whether explicit or implicit, through collapse, revolution, or inflation. The last can be accomplished through currency debasement of some kind, but the risk is that doing so can also lead to the other two. A key text on the moral and theological as well as social and political implications of such activity is Juan de Mariana’s Treatise on the Alteration of Money. In an era of fiat currency, it is perhaps somewhat technically easier to debase currency. You can call it “quantitative easing” or the like. Maybe you can print more money or mint a trillion dollar coin. But in any case the moral principles at play largely remain the same as those Mariana identified centuries ago.
Some of the concern about the size of the federal debt may be misplaced, in the sense that things look a bit better if you account for the relative size of the economy. Absolute debt numbers can be misleading if they are not compared with the results of overall economic growth. Now this contextualizing of absolute debt figures has an additional consequence, however, and it touches on another way to deal with a debt crisis. A polity might grow its way out of a crisis. This is not a simple thing, of course. But it is true that a vibrant and growing economy can deal with relatively greater levels of government spending, whether on social welfare programs or on servicing debt. This is one of the dynamics that has allowed social democratic states to survive in the modern world. In that case economic growth becomes both a moral imperative and a political necessity.
The premium placed on economic growth in this scenario places a great deal of pressure on the economy to deliver growth and makes the stakes of a downturn, to say nothing of a recession or depression, that much greater. So as we amass more and more public (and private) debt, we face fewer and fewer options, and those that are realistic become more and more uncomfortable. All of this speaks to the need for responsible thought and action with respect to substantial and comprehensive budget reform sooner rather than later.