Neil Irwin takes on the conventional wisdom about U.S. debt:
The U.S. government debt is rising inexorably, according to the conventional wisdom in Washington, and the political system is too paralyzed to take unpopular actions to rein it in. Privately, many policymakers take it as a given that the situation will change only when the nation faces a Greek-style fiscal crisis.
But apparently nobody told the people who lend the U.S. government money. On Friday, they were willing to hand over their cash to the Treasury for 10 years for 3.3 percent interest, a level so low it implies they consider the United States among the safest investments in the world. Collectively, those investors -- think mutual funds, pension funds and foreign central banks -- could lose hundreds of billions of dollars if they're mistaken and the United States has a debt crisis.
It is the Beltway vs. the bond market, and they can't both be right.
It's obviously true that the Greece comparisons are preposterous. On the other hand, I think it's also true that the political system is too paralyzed to take unpopular actions. Health care reform has put in place mechanisms to slow the growth of health care costs, a major driver of the deficit. But that required a Herculean effort and is unlikely to be repeated.
Since 1990, when the conservative wing of the GOP decided that tax hikes of any kind were unacceptable in the pursuit of deficit reduction, we've had two efforts to reign in deficits. Both were undertaken by Democratic presidents in their first year, with the benefit of unified control of both houses of Congress, and at enormous political cost (not least of which was eating up much of their legislative calendar.) Clinton's 1993 deficit reduction was derided by centrists as ineffectual and conservatives as disastrous but took a major chunk out of the deficit. The Affordable Care Act has been derided in the same terms but will, I expect, play a major role in cost containment, albeit not for a long time.
The problem is that Obama inherits an even bleaker fiscal picture than Clinton did, and I don't see where the next push is going to come from.