Debt: The Most Predictable Crisis in U.S. History

And the pandemic has made it so much worse.

Former Treasury Secretary Henry Paulson issued a stern warning in last week’s Wall Street Journal: “A world-class financial system can’t exist in a country that fails to maintain the quality of its credit.”
America’s debt problem was already wildly out of control for the past 20 years, but we now face truly unprecedented additional levels of debt issued by Congress in response to the pandemic. From 2000 to 2019, the federal debt rose from $5.6 trillion to $22.7 trillion, and it is expected to top $27 trillion by year's end, a whopping 19 percent increase this year. Another trillion in virus relief spending now seems to be at the low end of spending estimates going into 2021.
This looming debt crisis is three-dimensional: moral, economic, and political.
The average American has an intuitive feeling that this is not sustainable. It’s the kind of “kitchen table economics” that Margaret Thatcher used to talk about. Tax payers have to balance their checkbooks, and so does the federal government — at least eventually. As Herbert Stein used to say, “If something cannot go on forever, it will stop.”
With interest rates at historic lows, the U.S. faces a crisis at some point in the future. If (when) interest rates return to more normal levels, the country will be bankrupt — unable to pay even the interest on its mountain of debt. This looming debt crisis is three-dimensional: moral, economic, and political.
Few modern politicians have thought of the country’s debt in moral terms. President Calvin Coolidge made the case almost 100 years ago:
I favor the policy of economy, not because I wish to save money, but because I wish to save people. The men and women of this country who toil are the ones who bear the cost of the Government. Every dollar that we carelessly waste means that their life will be so much the more meager. Every dollar that we prudently save means that their life will be so much the more abundant.
In the century since Coolidge spoke these words, the U.S. debt ...