“I’m living so far beyond my income that we may almost be said to be living apart”*… 


The U.S. national debt is once again raising alarm bells. Federal borrowing from outside investors expanded rapidly over the past decade, totaling more than $15 trillion in 2018, and it is projected to grow even faster over the next ten years under current law. Major budget legislation signed by President Donald J. Trump, along with continued growth in entitlements and higher interest rates, will see the debt nearly double by 2028 [PDF], coming close to the size of the entire U.S. economy.

If the debt continues to grow at an unsustainable level, it could expose the country to a number of dangers, economists say. In the extreme, the risk rises that Washington’s lenders, many of whom are foreign, could suddenly lose confidence, demand higher interest rates, and potentially trigger a fiscal crisis. Short of that, the rising debt could gradually squeeze discretionary spending and deny the country tools it needs for security and economic stability. Bringing the debt into check, experts say, will likely require politically difficult decisions to either curb entitlement spending, significantly raise taxes, or both…

A backgrounder from the Council on Foreign Relations: “The National Debt Dilemma.”

It should be noted that there are those who disagree with CFR (and the many others) who see the need to bring the deficit into balance via reduced spending and/or higher taxes: “The Radical Theory That the Government Has Unlimited Money.”

* e e cummings


As we parse “prudence,” we might send carefully-calculated birthday greetings to Franco Modigliani; he was born on this date in 1918.  An economist, he originated the life-cycle hypothesis, which attempts to explain the level of saving in the economy, suggesting that consumers aim for a stable level of consumption throughout their  lifetime (for example by saving during their working years and then spending during their retirement)– for which he was awarded the Nobel Prize in Economics in 1985.

Among his other accomplishments, he initiated the Monetary/Fiscal Debate when he (and co-author Albert Ando) wrote a scathing critique of an early 1960s paper by Milton Friedman and David Meiselman.  Freidman and Meiselman had argued (in effect) that monetary policy was the only effective tool in managing an economy; Modigliani and Ando pointed out flaws in their analysis and made the case for fiscal measures (effectively, government spending) as equally-effective tools.  The debate– known by the antagonists’ initials as the AM/FM Debate– rages to this day.