Some proponents of change try to discount economic consequences by making comparisons to post-World War II debt: We got out of that situation then, and we can do it now.
We disagree.
Defense spending was the cause of postwar deficits, with 90 percent of federal spending in 1945 attributed to defense. Upon conclusion of the war and subsequent demobilization, deficits vanished and surpluses were available in a two-year period.
According to current budget estimates, in 2016, entitlements and debt interest payments will be almost 70 percent of all federal spending. Can anyone suggest how to “demobilize” those costs? In that same year defense spending is estimated to be 18 percent of federal spending. How much more would anyone suggest that we cut significant funds in that area?
In postwar America, the debt was held by Americans through the use of war bonds. Inflation alone took care of that debt. A $50 bond in 1945 was a nice sum of money. Consider its worth in 1980. Today, over half of our debt is held in foreign countries. Watch the run on the dollar if we print money to get out of that debt. Unprecedented is a good word for that situation.
Take just this past year, with a federal deficit of $1.4 trillion. Try to find a way to turn that sum into a surplus in, what, five years, or 10 years, or pick your time frame. The stated goal of government now is not to regain surpluses; it is simply to reduce the annual deficit (not, we emphasize, the total debt). Take what we consider a “best case” scenario in the president’s current estimates, and we find a $20 trillion debt in 2019. And that is without additional costs of all the change being proposed.
Someday, maybe sooner than we think, the pain associated with such debt and spending will be that word again: unprecedented. The longer we wait, the greater the pain.
Opinion
In Our View: Unprecedented economy
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