If a government’s finances, as economist Joseph Schumpeter once wrote, strip away rhetoric to lay bare the true “spirit” of a people, then President Donald Trump’s first full budget proposal reveals a nation that is bombastic and fearful, grandiose and uncertain. Regardless of what actually makes it through Congress, the suggested cuts—$616 billion from health insurance for the poor, $140 billion from student loans, more than $190 billion from food stamps—outline a vision of government based on the notion that the state should stand aside so businessmen can work their magic. “This budget’s defining ambition,” the preamble states, “is to unleash the dreams of the American people.”

As remarkable as the scale of the cuts is the way Trump justifies them: the fear of debt. His budget message is threaded with dire warnings about our “unsustainable” national debt, which is nearing $20 trillion. This mounting burden, he warns, will place the United States in “uncharted fiscal territory,” leaving it vulnerable to “fiscal and economic crises.” The country has “borrowed from our children and their future for too long, the devastating consequences of which cannot be overstated.” To stave off a crisis, we must tighten our collective belts—which means cutting virtually every program designed to aid the most needy and marginal among us.

Trump’s invocation of debt as a justification for austerity is oddly evocative of the fiscal crisis that gripped New York City more than 40 years ago, a moment that seems to have shaped his thinking deeply. In the early 1970s, back when young Donald was busy running the outer-borough apartments his father had built, the city had fallen on hard times. A recession, white flight, and the loss of industry were making it tough for the city to pay for its impressive array of social services, including public hospitals and libraries, cheap mass transit, and a citywide university system. In the spring of 1975, when banks refused to continue marketing the city’s debt, New York turned to the federal government for aid. But the city was stonewalled by the administration of Gerald Ford, who counted among his advisers Alan Greenspan (fresh from the circles of Ayn Rand) and Donald Rumsfeld.

For these rising conservative stars, New York’s debt crisis was an opportunity to teach the country a lesson about fiscal responsibility. The possible risks of bankruptcy—for the city, state, even the federal government—seemed less important than bringing New York to heel. The administration’s disregard for the dangers of default led to the famous Daily News headline, “FORD TO CITY: DROP DEAD.” (The paper recently revived the line when Trump withdrew from the Paris accord as “TRUMP TO WORLD: DROP DEAD.”) ...