How did we arrive at a new normal of indifference to living on borrowed money? Federal budget deficits are poised to eclipse $1 trillion in 2020 and may never fall below that level again. There was hardly a word about this once-hot issue among Democrats or Republicans running in the midterm elections. Similar problems of matching spending with revenues exist at the state level, where unfunded pension liabilities grow while taxes are cut.
At the individual household level, following an uptick in savings after the Great Recession, most Americans can’t or don’t care about saving or balancing spending and income. About 80 percent of the population carries debt, totaling about $13 trillion, and one in five households have zero or negative assets.
The transition to this new normal has been as much a cultural story as a political or economic one. Whether one speaks of “thrift,” “living within one’s means,” or “pay as you go,” these were long the dominant values and standard practices of both governments and families. Throughout U.S. history, Americans and their government generally spent no more than their income or revenues and, ideally, would save some money. Of course, there were exceptions — such as wars and emergencies, and for individuals, poverty and other hardships — that necessitated borrowing. Economically, saving and investment were underpinnings of successful capitalism, and, morally, profligacy was a sin. Those who spent extravagantly were shady characters, while responsible budgeting was a sign of moral rectitude.