I provoked a tirade of abuse from Crikey readers in the past fortnight when I suggested it would be preferable that the $14.3 trillion United States debt ceiling not be raised. Apparently I hate debt, am a Republican partisan, a “gormless git”, and an “ignoramus”. And I should never quote writers such as Adam Smith or Henry Hazlitt, however relevant and timeless their insights.

I don’t renounce my view, which is even more apt now: absent a wise politician of great perseverance and popularity, only a genuine crisis can wrench the US from sliding into bankruptcy or enduring rampant inflation.

Without a hard-debt ceiling, the path of least resistance — ever greater debt — is too enticing. It will never be the “right time” to withdraw stimulus or to cut spending. Just look at Europe. For all President Clinton’s admirable surpluses in the late 1990s, America’s central government debt in 1999 was barely lower than it was in 1989, according to the OECD.

As real incomes have grown, the welfare state — social and corporate — has exploded. America will soon have World War II debt levels, rendering it incapable of countering any serious military threat without economic chaos.

By failing to grasp the nettle, the United States Congress has swapped a crisis yesterday for a far bigger crisis tomorrow. No wonder markets have tanked worldwide and the US has lost its AAA credit rating. And gold, which cannot be “quantitatively eased”, has surged past $1700 an ounce, and looks set to surpass its inflation-adjusted peak of the early 1980s.

The non-partisan Congressional Budget Office conservatively measures the US debt in 2011 at 69% of GDP (already above the level at which most sovereign defaults have occurred). This year’s budget deficit is $1.4 trillion (bigger than the entire Australian economy), and cumulative deficits from 2012 to 2021 are expected to be $9.5 trillion. By 2021, the CBO reckons US debt to GDP will be more than 100%, about Italy’s level today.

The vaunted $2.1 trillion spending cuts agreed as part of the Congress’s “resolution” are a joke. They are cumulative over 10 years, and $1.2 trillion of them are not even specified. The Afghanistan and Iraq wars and social welfare programs are exempt, casting doubt even on the timid aspiration.

President Obama’s $787 billion “stimulus”, which greatly exacerbated the debt crisis, deserves special censure. The Keynesian economic geniuses who designed it, Jared Bernstein and Christina Romer, said in early 2009 US unemployment by now would be below 7% with the plan, and 8.2% without it. US unemployment is now 9.1%! Clearly, the models and theory are not crap; the stimulus simply wasn’t big enough.

President Bush’s and Obama’s foreign wars might be defensible, but perpetuating bankrupt, repugnant business models with taxpayers’ money, underwriting rampant “stimulus” spending, and creating money out of thin air were always bad economics and insult the intent of the US constitution to boot. As Frederic Bastiat observed in 1848: “the bad economist pursues a small present good that will be followed by a great evil to come, while the good economist pursues a great good to come, at the risk of a small present evil.”

The idea that Congress should simply enact “a sensible program of tax increases and spending cuts” as my critics recommend, is naive and unhelpful. It ignores the incentives of US politicians (especially before the 2012 presidential election) and the history of the 20th century — one of ever larger government with debt trending up since 1970. Only a genuine crisis, prompted for example by a debt ceiling, can bring about the paradigm shift public finance in America needs.

But all is not lost. Alan Greenspan said yesterday that “the United States can pay any debt it has because we can always print money … so there is zero probability of default.” The French 1st Republic was punctilious about debt repayment too, ensuring all creditors received valuable assignats.

Another detractor accused me of being “morally opposed” to debt. I am not; but frankly a bit more morality and bit less Keynesian economics wouldn’t go astray.