In a federal budget filled with mind-boggling statistics, two numbers stand out as particularly stunning, for the way they may change American politics and American power.
The first is the projected deficit in the coming year, nearly 11 percent of the country’s entire economic output.
That is not unprecedented: During the Civil War, World War I and World War II, the United States ran soaring deficits, but usually with the expectation that they would come back down once peace was restored and war spending abated.
But the second number, buried deeper in the budget’s projections, is the one that really commands attention: By President Barack Obama’s own optimistic projections, US deficits will not return to what are considered sustainable levels over the next 10 years.
In fact, in 2019 and 2020 — years after Obama has left the political scene, even if he serves two terms — they start rising again sharply, to more than 5 per cent of gross domestic product. For Obama and his successors, the effect of those projections is clear: Unless miraculous growth, or miraculous political compromises, create some unforeseen change over the next decade, there is virtually no room for new domestic initiatives for Obama or his successors.
Beyond that lies the possibility that the United States could begin to suffer the same disease that has afflicted Japan over the past decade: As debt grew more rapidly than income, the country’s influence around the world eroded. Or, as Obama’s chief economic adviser, Lawrence Summers, once asked, “How long can the world’s biggest borrower remain the world’s biggest power?”
The Chinese leadership, who are lending much of the money to finance the US government’s spending, and who asked pointed questions about Obama’s budget plans when they visited Washington last summer, say they think the long-term answer to Summers’ question is self-evident. Obama has published the 10-year numbers in part, it seems, to make the point that the political gridlock of the past few years, in which most Republicans refuse to talk about tax increases and Democrats refuse to talk about cutting entitlement programs, is unsustainable. His prescription is that the problem has to be made worse, with intense deficit spending to lower the unemployment rate, before the deficits can come down.