The Ecstasy of Fiscal Policy

Let’s say you’re a political consultant. You’re sitting there in your West Hollywood bondage-themed strip club with party donors picking up the tab, and, of course, you’re thinking about what a great country this is. Swept up in the spirit of gratitude, you decide you’d like to give back. You’d like to solve the country’s looming fiscal catastrophe.

The heart of the problem, you figure, is that unlike yourself, Americans have grown complacent and careless. For 200 years, they lived precarious lives. There were boom and bust economic cycles, devastating epidemics and natural disasters that came without warning. These conditions instilled a sense of prudence. The thought of running up excessive debt filled them with moral horror.

But over the past years, life has become secure. This has eroded the fear of debt, private and public. In 1960, the nation’s personal debt amounted to 55 percent of national income. By 2007, it had risen to 133 percent of national income.

In 1960, a politician would have been voted out of office if he had allowed the federal debt to double in a decade. Now politicians are likely to get voted out of office if they try to prevent it.

These days, voters want low taxes — about 19 percent of G.D.P. And they want high spending — over 25 percent of G.D.P. by 2020. As a result, federal debt, which stood at 41 percent of G.D.P. two years ago, is forecast to balloon to 90 percent of G.D.P. in 2020, according to the Congressional Budget Office. By that time, interest payments on the debt alone would be $900 billion a year.

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