Holman Jenkins Reveals the Real Crisis, and It's Not the National Debt

“I also remember 9/11. Every sense at the time recognized the magnitude of the event and also that the U.S., with so much money in its pockets, and political imperative being what it was, was about to engage in gross overkill.” That’s Holman Jenkins in last Saturday’s Wall Street Journal.

Jenkins’s words are a reminder of the faulty thinking informing James Buchanan’s (1919-2013) famous assertion that “The primary real burden of a public debt is shifted to future generations.” No, the burden is now. See Jenkins.

He observes that the world produces “complex policy challenges" for U.S. policymakers, and that they have “a hard time producing intelligent policy responses” to them thanks to “the world’s seemingly bottomless appetite for U.S. debt.” Yes, precisely.

What Jenkins writes is a major theme of The Deficit Delusion: left, right, libertarian, and supply-side obsess over how much is owed by the U.S. Treasury while utterly oblivious to why so much is owed, and why what's owed is a crisis. Which means they're mistaking the crises. But we're getting ahead of ourselves.

For now, the left claim the national debt is an effect of not enough taxation of the rich, the right laughably say wasteful spending by Democrats is its cause, libertarians claim the debt will be fixed by a combination of spending cuts, entitlement reform, and tax increases, while supply-side happy talkers essentially agree with the left that the rich aren’t taxed enough, but that the way to get more tax revenue out of them is to lower their tax rates. To the warring ideologies, the national debt is a consequence of insufficient tax intake. They’re dangerously incorrect.

Jenkins knows why, even if he arguably hasn’t expressed it until the referenced column. It’s worth quoting again his essential point about “the world’s seemingly bottomless appetite for U.S. debt.” Why the insatiable appetite? Libertarians and conservatives have never bothered to answer the previous question. Instead, and to boisterous applause, they simplistically claimed the debt springs from federal spending exceeding federal tax revenue.

Ok, so why don't Haiti, Peru and France have as much debt as the U.S. does? They never answer. Jenkins has hit on why. The world’s seemingly bottomless appetite for U.S. debt is an effect of too much tax revenue now, and much more perilous for all, the market expectation of exponentially more tax revenue in the future.

Bringing it back to Buchanan, Jenkins’s lament about “gross overkill” in the aftermath of 9/11 wasn't just about 9/11. What followed the wars was harmful too. Jenkins lists “the fiscal debacle of ObamaCare, the fiscal debacle of climate policy and, in crescendo fashion, our Covid response,” as a reminder that a government with too much money to spend visits harm on the people right away. Translated, central planning sucks.

Buchanan's defenders are known to say that what the Nobel Laureate really meant was that he disdained debt, and that “balanced budgets” would restrain the very debacles disliked not just by Jenkins, but also the author of The Deficit Delusion. No, that’s not true. $40T worth of debt explains why.

Implicit in the money owed by Treasury is a market expectation that federal revenues today are a pale imitation of what they will be. Which means as a bipartisan consensus grows that the rich should be excessively taxed, the capacity for federal blunders will grow with it.

See Jenkins. The former deficit hawk has unveiled the real crisis, albeit one that reveals the debt as the effect, not the cause of our near-term crises care of a government with way too much money to spend.

Originally published on Real Clear Markets.