ALEXANDER HAMILTON ARGUED PASSIONATELY about the importance of public credit but always partnered with fiscal responsibility.
Today, Daniel Gross, a former colleague of mine at the New America Foundation, writes in the New York Times:
From the beginning of 2001 to the end of 2003, the economy added $1.317 trillion in gross domestic product and $4.2 trillion in debt.
That means that each new dollar of economic output was accompanied by $3.19 in new debt. So now, for the first time, the debt-to-G.D.P. ratio stands at more than two to one.
Dan’s article is well worth reading. The East Asian Economic Shocks of 1997-1998 that had negative viral effects in Latin America and Russia were, to some degree, a microcosm of the type of debt, investment, and currency shocks that Dan Gross writes about.
Martin Wolf of the Financial Times worries, like I do, about the quick build up of U.S. government liabilities as a percentage of GDP and that failing to correct this trend, which he argues is tough to do, will eventually drive the U.S. economy towards ruin.
I would not go as far as Wolf does, but I do think American living standards are going to decline dramatically because of the unsustainable mortgage payments Americans are paying to enjoy a lifestyle and a war that they cannot currently afford.
— Steve Clemons