In my recent readings, I’ve come across something that seems extraordinary in our time, but really wasn’t.
For most of our history, we didn’t worry about Federal budget deficits. The government went into debt at its inception, for the Civil War, and for World War I. In between those events, the government ran a surplus, and paid down its debt. It was only when we started trying to use deficit spending to get us out of the Depression that we got into trouble.
The Founding Fathers regarded public debt as dangerous, and for about 150 years, we believed them. To be sure, it wasn’t always smooth sailing. There was boom and bust, but generally we recovered more quickly from the busts than the present situation. And taxes went up and down, depending on the vision of the party in power. But the idea that the national debt was something to ultimately pay off was accepted by just about everyone.
In 2000, when we had been running a surplus for a couple of years, Bush, the candidate, said that the surplus belonged to the American people, and he would give it back through tax cuts. And, indeed, once elected, he did just that. The surplus was not meant for us to rebuild, and prepare for the next crisis: it was a big fat cookie jar waiting to be raided. So much for the dangers of public debt.
So why can’t we return to our roots?
Because trying to pay back our debts would mean both higher taxes and lower spending, and both of these are politically unacceptable.
It was a charming thought, though….