Grant demurs. He rightly traces our troubles in large part to our leaving the last semblance of the international gold standard in 1971. Grant likens this move to giving the state a "magic credit card," because it removed virtually all constraint upon government spending, because no more did the state have to rely on taxes and private lending. It could rest on borrowing funded by the Federal Reserve.
That is exactly what it did. Grant notes that
In the 10 years before 1971, the "gross" public debt (counting even those obligations held by the government itself) had climbed to $408 billion from $293 billion. This increase amounted to a compound annual rate of only 3.4%, the Great Society and the Vietnam War notwithstanding. In the next 10 years, till 1981, the gross debt jumped to $995 billion from $408 billion—a compound annual rate of 9.3%, the close of the Great Society and the end of the Vietnam War notwithstanding. Not until fiscal 2001 did the debt reach $5.8 trillion. Yet it expanded by an identical $5.8 trillion in the four short years between 2007 and 2011. Now the grand total stands at $15.6 trillion.
Some will chafe at the authors' proposals for raising the gasoline tax or reducing the mortgage-interest deduction or increasing the Medicare Part B premium. Myself, I take umbrage at their interpretation of the American past. In money and banking, and therefore in debts and deficits, the way forward is through the constructive adaptation of a history they never quite acknowledge. Here's an idea: Let's try capitalism for a change.