Another Day Older

Robert J. Samuelson’s latest Washington Post column is a jeremiad against the rising public debt:

What is missing in this campaign, as I have written before and no doubt will write again, is an informative and honest discussion of the role of government in American life. We don’t want to admit that government worth having is worth paying for, through taxes — with the well-known exceptions of recessions and wars, when deficits are often inevitable and ­desirable.

Let’s concede that higher deficits are one problem that can’t be blamed on President Trump. Since the 1970s and 1980s, Democrats and Republicans alike have evaded the hard questions required to balance the budget.

Should we direct more — or less — aid to those in the bottom half of the income distribution? Have we shortchanged defense? With an elderly population that is richer and healthier than its predecessors, should we raise eligibility ages for Social Security and Medicare? Should government continue to run a railroad (Amtrak)? Are we undertaxed? Do farmers need to be so heavily ­subsidized?

His concerns about high levels of debt are:

First: As government debt piles up, it increasingly crowds out private investment. This, in turn, weakens productivity growth, which is a major source of higher living standards. With interest rates now so low, this doesn’t seem a problem — which is why it is.

Second: The truly scary possibility is a run on the dollar. If huge budget deficits subvert global confidence in the dollar — causing investors to dump the currency — restoring that confidence might require deep cuts in federal spending and steep increases in taxes.

The first is not materializing. If there were a crowding out effect, you would expect private borrowing to decrease as public borrowing increases. That isn’t happening.

Regarding the second, you might be interested in the Treasury Department’s chart here. I realize that these things can happen very suddenly but I don’t see any signs of a run on the dollar and President Trump’s last budget should certainly have produced some effect. The point that chart really makes to me is that it’s very, very clear that Japan and China are up to something. They are holding far too much in the way of Treasuries. Unless they are, in fact, boosting their foreign trade by buying up large amounts of Treasuries, I see little explanation. Compare them with Germany.

If there is any concern about public debt the target of that concern should be state and local governments. After all, state and local debt accounts for about half of the total public debt as a proportion of GDP.