Before the South boomed as America’s exemplary region of economic growth, some Southern states with low indices of social progress (concerning poverty, health, education, etc.) used to think: Thank God for Mississippi. It generally ranked lower.
Until recently, Italy and Greece, Mediterranean polities with grand cultural inheritances but deplorable recent habits, were derided as developed nations exemplifying incorrigible fiscal incontinence. Today, they might think: Thank Zeus for the United States.
Before the South boomed as America’s exemplary region of economic growth, some Southern states with low indices of social progress (concerning poverty, health, education, etc.) used to think: Thank God for Mississippi. It generally ranked lower.
Until recently, Italy and Greece, Mediterranean polities with grand cultural inheritances but deplorable recent habits, were derided as developed nations exemplifying incorrigible fiscal incontinence. Today, they might think: Thank Zeus for the United States.
The International Monetary Fund forecasts the U.S. government debt will be above 7 percent of GDP every year until 2029, with the debt reaching 143.4 percent of GDP by the decade’s end. The Congressional Budget Office projects the debt increasing for decades. As a percentage of their GDPs, Italy’s and Greece’s debts are expected to decline, and to be exceeded by the U.S. debt’s percentage in 2030.
Last week, the undiscourageable Peter G. Peterson Foundation, which shoulders the Sisyphean task of warning Americans about their ruinous fiscal habits, published five essays by six fiscal and economics writers on “Lessons from History for America Today.” The essays probably will make no difference in this sleepwalking nation’s behavior, but they are, in their way, as riveting as Walter Lord’s 1955 “A Night to Remember,” about the “unsinkable” Titanic sinking. The essays say:
Federal debt has increased for 24 consecutive years. In constant 2025 dollars, it has more than tripled. Debt problems were successfully addressed in the 20th century, following World War II and in the 1990s. Debt fell in the period 1946 to 1974 from more than 100 percent of GDP to less than 25 percent, and from 48 percent of GDP in 1994 to 31 percent in early 2001.
But two post-World War II decades’ average growth (4.2 percent and 4.5 percent in the 1950s and 1960s, respectively) was the 20th century’s fastest in peacetime. This was powered by war-developed technologies (e.g., electronics, aircraft, early computers), and air conditioning that opened the South. Interest rates were low; often negative as inflation averaged 7 percent, 1947-1951. There was an average primary budget surplus (budget balance net of debt service payments) of 0.9 percent of GDP, 1947-1973. The primary balance was negative in just three years (1953, Korea; 1959, a recession; 1968, Vietnam and Great Society spending).
In 1960, however, Social Security was less than 13 percent of federal spending (today, 23 percent). Medicare and Medicaid did not exist. And federal revenue as a share of GDP was slightly higher than today. In the 1990s, there was the post-Cold War “peace dividend.” Digital technologies of the “new economy” accelerated productivity. Furthermore, in 1993 Congress trimmed Medicare spending and modestly increased tax revenue.
None of these panaceas are now available. And few expect growth spurts comparable to the 1946-1973 or 1995-2000 eras of low political polarization.
With annual deficits approaching $2 trillion even with the economy humming, and with defense spending down to around 3 percent of GDP (above 13 percent during the Korean War; above 9 percent during peak Vietnam), what can cause sustained economic growth of at least 5 percent to cope with the debt’s growth? Artificial intelligence? A risky reliance. Revenue from the president’s perhaps unconstitutional tariffs? A net drag on the economy.
A nation that used to borrow for emergencies now is mired in a perpetual emergency because it is borrowing — $2.6 trillion annually projected by 2034 — to fund current consumption of government goods and services.
The president’s politicizing of economic information — can the Bureau of Labor Statistics still be trusted? — generates uncertainty and complicates attracting foreign purchasers of U.S. debt. Uncertainty is cubed because amid today’s loosening constraints on executive behavior, Congress is losing control of spending. If the Federal Reserve must raise rates to counter decreased global demand for this debt, growth will slow, and today’s slow-motion crisis will accelerate.
We are spending our rainy day fund during (relatively) sunny weather. A great nation is reduced to fanciful hoping — that, for example, AI eliminates economic rain.
President Dwight D. Eisenhower’s 1961 farewell address is remembered for his forebodings about “the acquisition of unwarranted influence … by the military-industrial complex.” Ike ended, however, warning against:
“ … the impulse to live only for today, plundering, for our own ease and convenience, the precious resources of tomorrow. We cannot mortgage the material assets of our grandchildren without risking the loss also of their political and spiritual heritage.”
When he spoke, the national debt was 52 percent of GDP. Today’s $38 trillion is 125 percent, projected to reach 143 percent by 2030. This assumes, rashly, that government behavior does not make things even worse sooner.
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