Kevin D. Williamson of National Review Online has detected a disturbing new theme within media reports about the nation’s long-term obligations. Williamson contends too many pundits and prognosticators are arguing that there is no debt problem.

… [T]he debt crisis is solved, if you ignore most of the debt. Of course our entitlement promises are not formal debt in the sense that Treasury bonds are, and of course it is a certainty that they are not going to be paid out at their present value. But that does not mean that we have a get-out-of-fiscal-jail-free card up our national sleeve. We experienced a very nasty recession in 2008–09 because Americans saw some $7.5 trillion in home equity disappear. (The vanishing equity caused the recession, not the other way around.) Americans thought they had $7.5 trillion more wealth than they had, and they had made economic plans (about working, saving, and consuming) based on that belief, and businesses had made plans of their own to accommodate them.

Similarly, Americans currently believe that they have some claim to entitlement benefits that are underwater to the tune of more than $60 trillion in unfunded liabilities. If a $7.5 trillion hit caused the Great Recession, imagine what a $60 trillion hit is going to do. It does not matter that no American in his right mind should have a rational belief that he is going to collect promised entitlement benefits; nobody in his right mind should have believed that the home prices were going to keep going up forever, either.

Another point to consider is that economists talk about “stabilizing” the debt in terms of its proportion to the national economy. Surely that is the most important measure, and possibly the only relevant measure for a smaller country. But the United States accounts for about one-fifth of the entire world’s economy. The market for sovereign debt is large, but it is finite. Even if we ignore the unfunded liabilities and just look at the cash deficit, the United States is planning to borrow at least 1 percent of the entire world’s economic output, year in and year out, for the foreseeable future, just to finance the federal budget deficit. Environmentalists love the formulation: “The United States has only 5 percent of the world’s population but consumes X percent of . . . ” The annual U.S. budget deficit is at present about the size of the world’s steel industry ($600 billion per year). It is very likely that the world’s investors will find competing uses for that money.