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Jared Dillian

Everyone Has Forgotten the Downside to Debt

It has been a long time since anyone has uttered the phrase "crowding out," but expect to hear it more often.
Where did all the deficit hawks go?

Where did all the deficit hawks go?

Photographer: Sam Greenwood

As a new capital markets associate at Lehman Brothers in 2001, I was thrown into the summer program mating ritual known as rotations. That's when you spend time working in various areas of an investment bank before being assigned to a department. The least popular assignment at the time was the government bond trading desk. Why? Because the U.S. was running a budget surplus, and everyone knew there would be no more government bonds to trade because the government's borrowing needs would drop if there was no deficit to fund.

As we know, government bond trading survived. Fiscal discipline went out the window after the Sept. 11. attacks and people were no longer squeamish about spending money if it was for counter-terrorism purposes. A whole new government agency -- the Department of Homeland Security -- was created out of thin air. And there went the surpluses.