Veronique de Rugy: The same crisis wearing different clothes

Economist Veronique de Rugy argues that America's recurring fiscal crises are not separate events but the same crisis wearing different clothes — and that the pattern will continue until the underlying structural problems are addressed.

De Rugy, a senior research fellow at the Mercatus Center at George Mason University, points to a consistent pattern: a crisis emerges (financial, pandemic, geopolitical), the federal government responds with massive spending, the deficit explodes, debt reaches new records, and then — when the crisis fades — the spending doesn't. Each crisis leaves a higher baseline of federal expenditure that becomes the new floor for the next emergency.

The numbers support her thesis. Federal spending as a percentage of GDP has increased with each crisis — from the 2008 financial crisis through COVID-19 to the current period of elevated military and domestic spending. Each time, the argument is that the spending is temporary and necessary. Each time, much of it proves to be permanent.

De Rugy's proposed solution is structural rather than incremental: spending caps, entitlement reform, and a rewriting of the budget process to make it harder for emergency spending to become permanent. She acknowledges the political difficulty — no politician wants to be seen as opposing crisis spending — but argues that the alternative is a debt trajectory that eventually forces far more painful adjustments.

The counterargument, made by Keynesian economists, is that crisis spending prevents worse outcomes and that the debt-to-GDP ratio, while high, remains manageable given the United States' economic growth and the dollar's role as the global reserve currency. The debate, in other words, is about whether the current path is unsustainable or merely uncomfortable.

What This Means For You: The national debt is an abstraction until it isn't. When it becomes real, it shows up as inflation, higher interest rates, reduced government services, or some combination of all three. De Rugy's point isn't that you should panic about the debt — it's that the pattern of crisis-driven spending increases that never reverse is a structural problem, not a series of unrelated events. Understanding that pattern helps you make better financial decisions about your own debt, savings, and investment strategy.