Can the national debt and deficits ever be paid off?
''From the nation's 18th-century founding until 1971, the dollar was defined as a weight of gold or silver. Americans did business with paper, of course. But these commercial bills and banknotes were convertible into monetary bedrock, the precious metals. The expression sound as a dollar derives from the ring of a gold piece when you plunked it on a counter.
Sound money coincided with balanced budgets. Government borrowings climbed in wartime and subsided in peacetime. The pattern was disarranged by depression in the 1930s and war in the 1940s. It was broken by the Johnson Administration's guns and butter and entitlements programs in the 1960s.
Richard Nixon administered the coup de grace on Aug. 15, 1971, when he announced that the dollar would derive its value from the say-so of the government. The Fed could print as many green bills as the traffic would bear.
Many applauded that sea change, then and later. Easy money rarely fails to please -- at first. It buoys stocks, bonds and commercial real estate. House prices jump, and car sales zoom.
Politicians, noticing how a bull market fattens public pension funds, ratchet up the benefits they promise to retirees (a fact that state and federal pensioners are encouraged to remember on Election Day).
Periodically, the buzz wears off. What remains is a hangover of debts and promises. The proliferating dollars facilitate heavy borrowing. Ultra-low interest rates mask the cost.
I don't ask that we return to some long-lost fiscal and monetary Eden. None has ever existed, even in America. Crises and business cycles are always with us. I merely observe that sound money and a balanced budget were two sides of the coin of American prosperity.
Then came magical thinking. Maybe you had a taste of modern economics in school. If so, you probably learned that the federal budget needn't be balanced -- it's nothing like a family budget, the teacher would say -- and that gold is a barbarous relic. To manage the business cycle, the argument went, a government must have the flexibility to print money, to muscle around interest rates and to spend more than it takes in -- in short, to 'stimulate.'
Oh, we have stimulated. Between the fiscal years 2008 and 2012 alone, federal deficits totaled $5.6 trillion. The public debt nearly doubled in the same span of years, to $11.2 trillion. The Federal Reserve tickled $1.6 trillion in new digital dollars into existence. True, our Great Recession proved no Great Depression, but the post-2008 recovery is the limpest on record.
A thin cheer went up in January when the deficit (calculated over the 12 preceding months) weighed in at a mere $405 billion, the lowest over any 12-month period since 2008. Only $405 billion. It's not so much, as Washington strums its calculators.
Let us pause to reflect that a billion is a thousand million, and that a trillion is a thousand billion -- or, alternatively, a million millions. It's a measure of the fix we're in that the billions hardly seem worth talking about.''
''The debt, as big as it is, is the measure of past spending in excess of tax receipts, a pattern of bad fiscal habits that traces its intellectual roots to John Maynard Keynes and has its dollars-and-cents origins with Lyndon Johnson and his Great Society. What awaits us and our children and their children is the unpaid tab of the future.
You can't blame people for not paying attention. America has forever defied the doomsdayers. The very language of government debt is calculated to tranquilize the critical mind. We speak of the Department of the Treasury rather than the Department of the Debt. (There's no net treasure in the Treasury.)''
''We always need protection against cockeyed economic experimentation. Once a national consensus on money and debt furnished this protective armor. Money was gold and debt was bad, Americans assumed. Most credentialed economists today will smile at these ancient prejudices. Allow me to suggest that our forebears knew something.
Keynes himself would recoil at 0% bank-deposit rates, chronically low economic growth and the towering trillions that we have so generously pledged to one another. (All we have to do now is earn the money to pay them.)''