The lead editorial in today’s Washington Post, eyeing the coming economic collapse, calls for an end to the Bush assministration’s profligate ways.
[T]he risk of a currency crash grows every day. In 2003, the United States had to attract $530 billion of foreign capital to finance its purchases of foreign stuff; in 2004 it had to attract $650 billion; this year, it may have to pull in as much as $800 billion. Every year of vast borrowing increases borrowing in later years; as Brad Setser of Oxford University notes, just paying interest on the $800 billion borrowed in 2005 might add $40 billion to the overall 2006 deficit.
To stabilize this house of cards, Congress and the administration should pull the one lever they have: They should reduce the nation’s reliance on foreign capital by cutting government borrowing. This isn’t going to be possible through spending cuts alone. It’s going to take higher taxes.