Green Room

How I Learned to Stop Worrying and Love the Debt Bomb

posted at 10:17 am on July 19, 2011 by

The title is misleading; then again, so was the subtitle for Dr. Strangelove. Sometimes, a light touch helps illuminate a heavy topic.

Let’s start with the heavy part. Kevin D. Williamson lays out the inevitable endgame for our public debt problem:

Medicare, Social Security, and national-defense spending are going to be cut. Lots of other stuff is going to be cut, too. To the extent that such cuts are insufficient, taxes are going to go up to pay the difference. That’s the deficit-reduction deal. There isn’t another one. The question is only whether we implement it voluntarily or involuntarily, under conditions of stability or under conditions of crisis.

The issue of whether we are stable now aside, Williamson’s question reminded me of a piece from Megan McArdle back in May, warning left and right that neither may like the results of waiting:

Fiscal crises are–ahem–inherently unpredictable events. No matter how you assure each other that your awesome new health care plan can’t possibly be repealed because everyone’s going to be lovin’ on it so hard . . . or that no peacetime US government in history has ever collected more than 20.5% of GDP . . . the fact remains that when interest rates are rising and everyone’s panicking, the unthinkable frequently happens. Moreover, the tax hikes and spending cuts that are required in a fiscal crisis tend to be much more draconian than would otherwise be required, because they tend to happen when GDP is depressed and the gap between tax revenue and spending is exceptionally large.

Some of what McArdle writes is true, but the real fight — both now or in a possible crisis — is over the mix of spending cuts and tax hikes. A look at other countries’ crises is rather eye-opening on this key point. Canada reduced government debt from 68% of GDP in 1994 to 29% of GDP in 2008. There were six to seven dollars in budget cuts for every dollar of tax hikes — and these were real cuts in spending, not reductions in spending growth, and not the imaginary spending cuts Democrats have offered Republicans in past decades. By 2000, Canada was cutting personal and corporate taxes, as well as capital gans taxes. (Read the linked story for another example, set by New Zealand in the 1980s.) During the same period, Sweden reduced public debt from 78% of GDP to 47% of GDP by cutting public spending from 71% of GDP in 1993 to 52% in 2008—that is, by almost one-fifth of GDP. During the period Sweden cut taxes four times and abolished wealth taxes, inheritance and gift taxes. Finland similarly cut spending and taxes as part of its fiscal consolidation.

Indeed, a study of fiscal consolidations in 21 countries of the Organization for Economic Cooperation and Development over 37 years concludes that failed attempts to close budget gaps relied 53% on tax increases and 47%, while successful consolidations averaged 85% spending cuts and 15% tax increases.

I am not for doing nothing about the debt ceiling and have written a number of pieces about the need to do something about the public debt at all levels of government. Moreover, it is certainly possible that in a debt crisis, the intransigence of the left could force the federal government to take a tax-heavy approach proven to fail in all those other OECD countries. I tend to think there is still enough of the American spirit around to resist becoming wage slaves to the state. Assuming we can manage to avoid a more statist approach than Canada, Sweden and Finland, it would seem the left ought to have the greater interest in defusing the debt bomb now, as a crisis will likely be tougher on their priorities.

Recently in the Green Room:



Trackback URL


“Gentlemen, you can’t make cuts in here! This is the Budget Committee.”

BobMbx on July 19, 2011 at 2:21 PM

This post has been promoted to

Comments have been closed on this post but the discussion continues here.

Jazz Shaw on July 20, 2011 at 4:11 PM

HotAir — Politics, Culture, Media, 2017, Breaking News from a conservative viewpoint
Top Pick

It’s only a “ban” until it becomes inconvenient

The decline and fall of Obamacare and the AHCA

Jazz Shaw Jun 24, 2017 8:31 AM

This was all over before it began

Fixing crime in America is a complicated issue

Taylor Millard Jun 23, 2017 8:31 PM

Cops alone won’t solve it.

Victim’s father was President Maduro’s supervisor back when he was a bus driver.

Democrats forgot all about the “era of good feelings”

“Bernie and Jane Sanders have lawyered up.”

“the Judiciary Committee is examining the circumstances surrounding the removal of James Comey.”

Winning isn’t everything. It is the only thing

Trump signs VA reform bill into law

John Sexton Jun 23, 2017 2:41 PM

“What happened was a national disgrace, and yet some of the employees involved in these scandals remained on the payrolls.”

A new era of something.

“…died suddenly in less than a week just after his return to the U.S.”

The shortsightedness of “Denounce and Preserve”

Taylor Millard Jun 23, 2017 12:11 PM

Pragmatism for the sake of pragmatism doesn’t always work.

Perhaps if you threw in a new car?

Gay marriages still growing, but not as fast

Andrew Malcolm Jun 23, 2017 10:31 AM

More, but not as quickly.

Should’ve stuck with the pirate gig. It was working for him

The battle for the rubble of Raqqa is underway

Andrew Malcolm Jun 23, 2017 8:51 AM

Won’t be much left.

Your list of demands is a publicity stunt

“what happened that day was emblematic of a deeply troubling trend among progressives…”

“The jobs are still leaving. Nothing has stopped.”

Bad vendor. Bad! No cookie!

“The Corps is just starting to grapple with the issues the court has identified.”

“So you want me to sing my praises, is that what you’re saying?”

Why would we possibly want that?

“I mean he sold our country to The Russians.”

I could think of someone else you might want to ask about…

“You can ask a hundred people what hate speech is and you get a thousand different answers”

Trump: I never made any recordings of Comey

Allahpundit Jun 22, 2017 2:01 PM


Hackers stole private data from election databases

John Sexton Jun 22, 2017 1:21 PM

“90,000 records stolen by Russian state actors contained drivers license numbers”

Failure to protect the city

Big man on the Middle Eastern campus

Biased Americans see media as biased.

Tough times down on the liberal ranch

Will Nancy Pelosi survive this latest Dem disaster?

Andrew Malcolm Jun 22, 2017 8:41 AM

Eat quick, before it’s gone.

Slow your roll, boss