Time to get serious about government debt

WASHINGTON — The problem of the burgeoning government debt is mainly political, but the adverse consequences may be economic. The trouble is that we don't know what those consequences may be, when they may occur, or even whether they will occur. Without some impending calamity, politicians of both parties recoil from doing anything unpopular that might bring the budget into balance over, say, the next six or seven years. The idea of anticipating and pre-empting future problems is not on their agenda.

Although the recent surge of budget deficits — the annual gaps between outlays and revenues, resulting in more federal debt — reflects the savage recession, the true cause is political. Deficits allow liberals and conservatives to maintain self-serving public positions. Liberals claim we can have more government (more health care, more education, more transportation) without taxing anyone but "the rich." Conservatives promise that taxes can be cut without depriving anyone (retirees, veterans, cities and states) of existing government benefits.

Neither claim is remotely believable under the assumption that, over the long run, government benefits and programs ought to be paid with taxes.

The truth is that government, again under both parties, has promised far more in benefits than can be covered by existing taxes. Only borrowing could reconcile the rhetorical claims with underlying economic realities.

There have been 43 deficits in the past 48 years.

Until recently, the borrowings, though usually undesirable, were not alarming. But the recession and an aging population signify that we have crossed a threshold where actual and prospective borrowings are so huge that no one can foresee the consequences. The best measure of debt burden is its relation to the nation's annual income, or gross domestic product. The same approach applied to a household with $25,000 of debt and $50,000 of income would produce a debt-to-income ratio of 50 percent.

In 1946, after World War II, the ratio of publicly held federal debt to GDP was 108.6 percent. Since then, the economy (our income) has generally grown faster than the debt. In 1974, the debt-to-GDP ratio reached a post-World War II low of 23.9 percent, and even in 2007, it was only 36.9 percent. That was manageable.