Should the United States someday suffer a budget crisis, it will be hard not to conclude that Obama and his allies sowed the seeds, because they ignored conspicuous warnings. A further irony will not escape historians. For two years, Obama and members of Congress have angrily blamed the shortsightedness and selfishness of bankers and rating agencies for causing the recent financial crisis. The president and his supporters, the historians will note, were equally shortsighted and self-centered -- though their quest was for political glory, not financial gain.
Let's be clear. A "budget crisis" is not some minor accounting exercise. It's a wrenching political, social and economic upheaval. Large deficits and rising debt -- the accumulation of past deficits -- spook investors, leading to higher interest rates on government loans. The higher rates expand the budget deficit and further unnerve investors. To reverse this calamitous cycle, the government has to cut spending deeply or raise taxes sharply. Lower spending and higher taxes in turn depress the economy and lead to higher unemployment. Not pretty.