“Blessed are the children since they shall inherit the national debt.” That was a phrase that President Herbert Hoover uttered several times in the 1930s when the debt total was nowhere near what it is today. For the first time ever, the U.S. national debt has surpassed $30 trillion.
President Hoover obviously was worried about the national debt back then, so why doesn’t it seem to be as much of a concern today among many politicians and economists?
Desmond Lachman, a resident fellow at the American Enterprise Institute, recently wrote, “Our politicians and academics are unfazed by record peacetime budget deficits and unprecedentedly high debt levels. In their mind, high public debt levels do not matter.”
But they do.
As Mr. Lachman points out, the major problem with a high public debt level is that it saddles the government with large future interest payment obligations. That leaves little room for other public expenditures and makes it difficult for the government to bring a budget deficit under control. Failing to rein in the deficit, in turn, risks keeping the public debt on an ever-increasing path.
A high public debt level also highly compromises the Federal Reserve’s ability to keep inflation under control. It makes it more difficult for the Fed to raise interest rates for fear of adding to the government’s interest payment burden. Such a consideration would seem to have particular pertinence today with inflation running at its fastest pace in the past 40 years.
Especially at a time of high inflation, a high public debt level also can make the U.S. economically vulnerable. “That is because we have become the world’s largest debtor nation. For many years now, we have relied on the kindness of strangers in general and on the Chinese and Japanese in particular to finance our budget excesses,” Mr. Lachman wrote.
If the U.S. is not to go down the path of countries debasing their currencies to inflate away their debt, the passing of the $30 trillion mark for public debt needs to be taken more seriously than today’s politicians and academics seem to be doing.
As Mr. Hoover said, “We owe it to our children and grandchildren.”
Norfolk Daily News
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