The budget circumstance we find ourselves in demands tough decisions without the great luxury of time. We ought to at least understand the position we are in today.
Our republic can, and probably should, run a debt. As a great nation, we build and do things that endure and these should be paid for, in part, by successive generations. During the past decade we have fought wars and faced a major recession. Accruing a debt to win a war and mitigate the ill effects of a recession make sense. The question of course, is how high should this debt be?
We typically hold a debt of 30 percent to 40 percent of our gross domestic product. This is about twice our annual tax revenues. At that level, we can borrow inexpensively and expect reasonable economic growth if the extra spending boosts productivity.
Today our debt is $16.3 trillion. This is a larger share of our GDP than the debt we accrued throughout the Great Depression and the World War II. Worse still, it grows by $1.1 trillion per year, and there is little or no sign that this spending will boost long-term growth. We should be embarrassed by this profligacy.
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