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History is littered with examples of major economic and financial crises in countries that have engaged in public spending profligacy. That sad experience should be raising red flags in the United States, where the unsustainable longer-run trajectory of the U.S. public finances is now suggesting the real risk of either a destructive burst of inflation or an outright government debt default. This is particularly the case in today's U.S. context where an ever-increasing portion of the U.S. budget deficit is being financed by foreigners and where entitlement programs threaten over the longer haul to compound an already highly compromised public finance position.

These considerations would suggest that it bears reflecting on (a) what history might teach us about sovereign debt defaults; (b) what special features characterize the present U.S. public finance outlook; and (c) what the end-game might be for a country with unsustainable public finances.

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Desmond Lachman is a resident fellow at AEI.