Matthew Continetti writes, “Deficit hawks need to take a deep breath and stop squawking. The national debt is in bad shape, true. And it’s going to get worse, thanks to TARP and the stimulus bill and other baseline spending. But, for the next two years at least, the national debt will remain within its historic boundaries.” Continetti points out that the national debt will still be a lower percentage of GDP than it was after the United States fought and won World War II. He concludes, “All things being equal, with the right policies the United States can grow its way out of its current debt as well.”
Continetti himself acknowledges that all things aren’t equal: the massive and growing unfunded liabilities of our entilements “really do pose a long-term threat to American solvency.” And the taxes that will be necessary to fund these spending commitments and other increases in federal expenditures will make it difficult, perhaps impossible, to enact the right policies that will allow us to grow our way out of our current debt. (There’s also the not insignificant matter that we didn’t borrow money from the Communist Chinese to win World War II.)
The bailouts, the stimulus bill, whatever President Obama has in store for health care, and other possible spending increases are all coming at a time when the federal government can’t afford the commitments it has already made. “The trick is to finance the welfare state in a way that allows the maximum possible amount of individual liberty and economic growth,” writes Continetti. “Is Obama up to the task?”
Judging from Obama’s willingness to quickly and recklessly increase federal spending — given the baselines, probably permanently — I’d say the answer is no. But either way, the “trick” is easier to talk about than to execute. The Baby Boomers are retiring. And the deficit hawks have come home to roost.