Niall Ferguson: A Dogma to Wreck the Country

Roundup: Historians' Take

Niall Ferguson is a Harvard professor and Newsweek columnist.

Financial crises are complex, baffling things, but we all understand their impact on ordinary families. Take Demi and Rex. Like many American couples, they borrowed aggressively in the years before 2007. They have a big house, two big cars, four big wardrobes, and one big pile of debt, roughly three and a half times their combined incomes.

Demi blames Rex. He blew the cash he got from pre-crisis tax cuts on a hunting rifle and a midlife-crisis Harley-Davidson. Rex blames Demi. After the financial crisis struck, she went on a spending spree, landscaping the garden and hiring a maid. Demi thinks Rex needs to contribute more to the housekeeping. Rex thinks Demi needs to spend a whole lot less.

For weeks, their kitchen in Washington, D.C. (did I forget to mention they lived there?), has been the scene of bitter altercations. Insults have been traded. Dishes have flown. Things got so bad that at one point Rex threatened to call up the bank and freeze their joint account, even though this would have wrecked their credit score.

Of course, the recent wrangling between Democrats and Republicans has been much more frivolous than a domestic row—but with potentially much graver consequences. Ten years ago the federal debt was equivalent to less than a third of U.S. gross domestic product. Now it is nearly two thirds. If nothing changes, according to the Congressional Budget Office (CBO), the federal debt could exceed GDP by 2021. Interest payments alone could absorb roughly two fifths of all federal revenues by 2031.

So everyone agrees that the government has to address the debt, and soon. But what should be the mix of spending cuts and revenue increases?..

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