Mortgaging our future

Today Fed chair Ben Bernanke warned that long-term economic growth is endangered by the huge new levels of debt taken on by the federal government. Contentions looks forward to "Our high tax, low growth future"

Since we must scale back fiscal borrowing as we move into the future, there are only two alternatives: to accept far higher levels of taxation, or to accept a U.S. economy that is significantly smaller and slower-growing than it would otherwise have been. (The consequences of the latter, of course,are high unemployment and less material well-being for individuals.)

What would be a logical way to navigate between those alternatives? Adopt a high-tax policy that does as little as possible to burden highly-productive individuals, businesses and capital, thus lessening the impact on the size and dynamism of the economy.

But we already know that the President wants to do exactly the opposite. Faced with an evil choice between much higher taxes and a smaller economy, Obama is on track to give us both.

Right now, Washington is gorging on cheap borrowing supplied by the Chinese. Do they think this can continue? Here's the response when Treasury secretary Timothy Geithner told a Chinese audience about the U.S. Treasury bonds they've purchased: "Chinese assets are very safe."

The comment provoked loud laughter from the audience of students.

Guess not.