Mortgaging away our money and freedom

In today's WashPost, Robert Samuelson runs the numbers on "Obama's risky debt"

At best, the rising cost of the debt would intensify pressures to increase taxes, cut spending -- or create bigger, unsustainable deficits. By the CBO's estimates, interest on the debt as a share of federal spending will double between 2008 and 2019, to 16 percent. Huge budget deficits could also weaken economic growth by "crowding out" private investment.

At worst, the burgeoning debt could trigger a future financial crisis. The danger is that "we won't be able to sell [Treasury debt] at reasonable interest rates," says economist Rudy Penner, head of the CBO from 1983 to 1987. In today's anxious climate, this hasn't happened. American and foreign investors have favored "safe" U.S. Treasurys. But a glut of bonds, fears of inflation -- or something else -- might one day shatter confidence. Bond prices might fall sharply; interest rates would rise. The consequences could be worldwide because foreigners own half of U.S. Treasury debt.

This economic gamble in America is based on the concept that we're "too big to fail." Recent history suggests that's a dangerous assumption.

Over at Volokh, there's a post titled "The coming explosion of federal spending" and it concludes with a concept I've explored before when it comes to entitlement spending. When huge portions of the federal budget go on autopilot – that is, pensions, Social Security, Medicare, and interest on the national debt – what does that portend for the future of representative democracy?

It's important to recognize that the gargantuan deficits and looming fiscal crisis likely to result from the Administration's spending plans are just one part of the danger we face. Such massive increases in federal spending also exacerbate the more general problems caused by expanding government control over society. In particular, growing federal spending and regulation will make it even more difficult for rationally ignorant voters to impose meaningful democratic control on public policy. And they will provide numerous opportunities for interest groups to exploit the growth of government for their own benefit, at the expense of the general public.

With the level of borrowing we're taking on, it's not so difficult to see a tipping point where our foreign policy is constrained by international creditors while domestic policy is steered (even more) by banks and lenders. For example, is it such a stretch to imagine that China could own such much U.S. debt that they would attack Taiwan without fear of retribution? What about when the government needs to borrow more money to pay for Social Security Treasuries and the lenders demand higher rates? Our fiscal irresponsibility and failure to address real problems in entitlement spending will subjugate America to the sway of its creditors.

We're putting on the handcuffs.