« 2012 Drought Cost Taxpayers $14 Billion | Main | Tax the Rich to Pay for Big Business Tax Breaks »

A Thought about our National Debt

In a Financial Times op-ed last week, Harvard economics professor Ken Rogoff says the "world is right to worry about US debt." He writes:

"America must shortly answer a series of fundamental questions. For example, as its share of global gross domestic product shrinks from about 20 per cent today to as little as 10 per cent in five decades, should it try to continue to play the role of global policeman? The US spends more than 4 per cent of GDP a year on defence, roughly twice the global average. The Obama administration’s fiscal plans anticipate a peace dividend after withdrawals from wars in Iraq and Afghanistan. The Republican party has reasonably argued that it is unrealistic to expect this quiet to last. At the very least, if military expenditures continue to fall, it becomes more important to have the fiscal capacity to ramp them up in response to new threats. It is also worth noting that if the US were ever forced to surrender the mantle of world policeman to, say, China, foreigners may no longer have quite the same desire for its debt.

"Another huge area of disagreement surrounds the question of what services should be provided by the federal government versus the states or the private sector. There is a lot of “low-hanging fruit” here. Productivity improvements in government services have been glacial compared with many other sectors of the economy . . . ."

At the American Enterprise Institute's blog, AEIdeas, James Pethokoukis comments on the op-ed, saying:

"In this FT piece, Rogoff makes another good point: It’s one thing to cut defense spending as a way of reducing debt. But it’s quite another to de facto shift that spending to expanding the welfare state and leave the debt problem to metastasize. “At the very least, if military expenditures continue to fall, it becomes more important to have the fiscal capacity to ramp them up in response to new threats.”

Pethokoukis also incorporated the following graphic in his blog post:

Concluding the op-ed, Rogoff says the United States "remains an incredible franchise with many remarkable strengths," adding that the world generally assumes this will continue. However, he says "it is hard for many in the US to escape the nagging feeling that just maybe this time we won’t."

TrackBack

TrackBack URL for this entry:
http://www.acta.us/growls-mt/mt-tb.fcgi/2311