“Washington’s spiraling debt trends are simply unsustainable.” Those are the words of Manhattan Institute budget expert Jessica Riedl in the Washington Post. But unless Riedl knows something that the deepest markets in the world don’t know, what she describes as unsustainable is quite sustainable.
The $37 trillion (and rising fast) worth of federal debt is loud evidence of the previous truth. As is made plain throughout The Deficit Delusion with numerous market-based examples, money is ruthless.
Only those expected to have sizable future inflows can borrow in sizable amounts of any kind. Applied to the U.S. Treasury, $37 trillion+++ debt is a signal of expectations in markets frequently ignored by budget experts that Treasury’s incomings in 2025 are slight relative to what they’ll be in 2035, 2045, and 2055. Call rising revenues the driver of the debt, but much worse, the source of soaring generational burdens regardless of debt.
It speaks to the problem that is budgetary balance. The latter has nothing to do with limited government, and everything to do with saddling future generations with much bigger governemnts to feed in the future.
To understand why, it’s worth remembering that in 1980 total federal tax revenues were roughly $517 billion. In 2024, they were roughly $4.92 trillion.
Hopefully the growing burden is obvious. In a country full of enterprising individuals like the U.S., budgetary balance is no accomplishment. And as the above numbers show, it once again has nothing to do with limited government. Which is what supply siders miss.
While the mouths of spend happy left wingers would have watered in 1980 if the coming explosing of federal tax revenue had been obvious, supply siders would have adopted a rather smug pose. At the doorstep of having their tax cuts come to fruition, they would have gleefully concluded the validity of their assertion that taxable access to a shrunken percentage of much greater economic growth would yield not just more government revenue, but quite a bit more annually. Hopefully readers see the problem with both assumptions.
For the left, if we ignore how consistently ineffective government programs have always been, we can’t ignore that every dollar spent by Congress has a multiplicative spending effect as constituencies start to form around existing and new programs. As for supply siders, their analysis would blithely ignore the incentives they believe in so deeply. Specifically, a much greater incentive among those with capital to buy the debt of the government poised for substantial tax revenue increases.
Still, let’s just assume what is 99.9999% unlikely, that politicians in the future will ignore the future entreaties of lenders eager to lend toward Treasury's ever-increasing revenue intake. If so, government continues to grow. See tax collections since 1980.
Which is quite the generational burden. Even budgetary balance leaves behind a much bigger government, and one that’s poised to grow substantially in future decades.
How we know the above to be true is the $37 trillion in debt. That it’s quite sustainable opposite Riedl can be found in the huge number. Translated, the debt is telling us that no matter what, whether through borrowing or not, the size of government is set to soar thanks to tax revenues in the future that will make present collections seem small by comparison.
In other words, budgetary balance in the future will signal government growth that will make the wasteful present appear parsimonious by comparison. That the latter is being signaled by $37 trillion in federal debt is something that will surely be lost on the self-proclaimed “deficit hawks,” but pesky market signals tell us it's true just the same.
