Is the federal government's history of enormous deficits proof that it can keep up the borrowing? Some people think so, and legislators sure act that way.

Federal debt held by the public now equals the size of the annual economy — and is growing. Yet investors continue buying Treasury securities. No government bond sale has really failed, no one has suddenly refused to finance Washington's spending, and no unmistakable moment has forced Congress to change course.

That leads some people I cross paths with in academic life to conclude that despite decades of dire warnings, we've managed to go from a 35 percent debt-to-GDP ratio in 2007 to 100 percent today with no devastating consequences. Their implication is that we can keep going right up to 175 percent in 2056, which is the trajectory if Congress fails to reform Social Security and Medicare and if interest rates rise only modestly.

The idea that all this debt won't bring a reckoning may sound tempting, but it's questionable at best.

First, markets have already reacted. The 2021-2022 inflation spike, the worst in four decades, was the price level adjusting to a $5 trillion flood of deficit spending that investors did not believe future fiscal surpluses would cover.

That fear led to inflation. It's hard to believe we won't get another market response when Congress........

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