In the great fiscal scheme of things, October 22, 1981 seems like only yesterday. That's the day the US public debt crossed the $1 trillion mark for the first time. It had taken the nation 74,984 days to get there (205 years). What prompts this reflection is that just a few days ago the national debt breached the $18 trillion mark; and the last trillion was added in hardly 365 days.  I remember October 1981 perhaps better than most because as the nation's budget director at the time I had some splain' to do. Ronald Reagan had waged the most stridently anti-deficit campaign since 1932 when, ironically, FDR promised a balanced budget while denouncing Hoover as a “spendthrift”. Likewise, Gov. Reagan had denounced Jimmy Carter's red ink and promised a balanced budget by 1983.

But as 1981 unfolded and the US treasury borrowed large sums each day to fund what we were pleased to call Jimmy Carter's “inherited deficits”, the trillion dollar national debt threshold rushed upon us. And, in truth it came far more rapidly than had been anticipated because by the fall of 1981, the Reagan white house had enacted the largest tax reduction in American history. On top of that, it had also green-lighted a huge defense build-up, yet, as we liked to rationalize at the time, had made little more than a “down payment” on sweeping reforms of domestic spending and entitlements.

The latter were supposed to happen in subsequent years and had been designated by a placeholder in the out-year budgets infamously labeled the “magic asterisk”. In fact, there was nothing magic or devious about it. Washington well recognized that it represented large and painful reforms of social security and other middle class entitlements that were to happen in 1982 and beyond.

Needless to say, we never got there. What happened, instead, is that the GOP embraced a revisionist fiscal policy, which at first was called “grow your way out”; and, eventually, was articulated by the nefarious Dick Cheney, as simply “deficits don't matter”.

Additionally, a new regime came to the Fed in August 1987 when lapsed gold bug, Alan Greenspan, discovered that he could run the Fed' printing press with gusto, yet falsely claim credit for the disinflation of the 1990s. In fact, the tens of million of Chinese peasants streaming from the rice paddies into Mr. Deng export factories inaugurated two decades of goods and labor deflation on a worldwide basis, allowing the Fed to monetize a growing portion of the ballooning national debt with seeming impunity.

Yet none of that was anticipated in October 1981. Most of Washington was still in thrall to the old-time religion, fearing the untoward effects of chronic budget deficits and unbridled rise of the national debt. That is, that massive treasury borrowing would “crowd” out private investment and eventually grind economic growth to a halt.

Even the Gipper, ever the optimist, did not want to trifle with this core precept of fiscal rectitude. With no inconsiderable reluctance, therefore, he embraced legislation to vault the national debt over the $1 trillion mark, while at the same time chiseling back his cherished tax cuts and defense build-up.

Back then, there was really no choice. You couldn't have found a single dyed-in-the wool Keynesian or even Marxist economist who would have embraced the path of massive, permanent government borrowing and debt monetization by the central bank which actually ensued.

So Washington stumbled forward at the $1 trillion mark. By October 1981, with the US economy sliding back into a double-dip recession, the fiscal math of Reaganomics was already beginning to burst at all the budgetary seams. The “Reagan tax cut”  had triggered a monumental bidding war on Capitol Hill among special interest lobbies, and had ended up reducing the permanent out-year revenue base by about 6.2% of GDP—-compared to the original pure supply side rate cut of less than 3% of GDP.