Some thoughts on the federal debt...

I guess my beliefs on the federal government's debt are pretty straightforward - and, at least I'd like to believe, fairly reasonable, logical, and sound from an economics point of view:

• The government owing money is not a bad thing.  Governments need to borrow money, and at times it is the best way to pay for something, especially a short-term, unexpected expense (stimulus spending during a recession, a sudden military buildup at the stat of a war, etc.)
• In normal times - decent economic growth, low unemployment, and relative peace - the federal government should not borrow much, if any, money.  That's the time to pay down existing debt (so you have room to borrow in future crises, plus it frees up capital for private borrowing/investment) and invest in the future:  improve education, fund more research in medicine and new technologies, repair old roads and bridges and build new ones, add new infrastructure (nationwide wifi, for example), etc.
• Government debt can be a bad thing when it becomes too big a percentage of GDP (the tipping point is probably somewhere around 90 or 100% of GDP).  Just ask Japan.  It can suck up too much of the available capital, stifling private investment.  Interest rates go up, making all borrowing more expensive and suffocating economic growth.  And taxes need to be raised during what is likely a period of economic stagnation, because the government can't borrow as freely (or cheaply) and just making the interest payments becomes a huge part of the government's budget.  Other budget items need to be cut - defense, education, care for the poor and elderly - because the debt payments squeeze them out.

So what does that mean about current fiscal policy?  Well, it means Bush got it wrong - he cut taxes and borrowed heavily during "normal" times, then added to the borrowing during two wars, never raising taxes to help finance them as they dragged on endlessly.  He also added a historic unfunded entitlement - medicare prescription drug benefits for the elderly - which compounded our fiscal woes.

As for Obama, he seems to be trying to hit the mark.  Short-term additional borrowing to prevent the Great Depression II and spark a sustainable recovery.  If anything, we might need more stimulus borrowing in the short-term.  But he says he wants to start looking toward getting our fiscal house in order as soon as it is feasible - and has commissioned a bipartisan task force to come up with recommendations by December.  We'll see if that bears fruit.  He also has Defense Secretary Gates proposing cost-cutting measures to responsibly shrink the defense budget.  The devil is in the details, but that is something that has to happen.  Obama also wants to, eventually, end the Bush tax cuts for the wealthy.  That's a no-brainer.

So Obama may be on a sensible course.  But the politics of fiscal policy in the US have been crazy ever since Reagan and the GOP made paying taxes almost seem unpatriotic.  We pay less in income taxes than most, if not all, developed countries.  Most of us pay less than we did two years ago.  And many Americans pay little or no income taxes.  It's time we all grew up and acknowledged that we need to pay for what we get - not just expect to get what we pay for.  Time to pay our bills, not borrow from our children's future earnings.