WHAT SHALL WE DO WITH THE SURPLUS?:

The federal debt held by the public is now growing at about a 3 percent rate, while the economy is growing at about a 3.4 percent rate (these are both in nominal terms). In other words, the U.S. deficit is now perfectly sustainable.

This represents a remarkable -- possibly even excessive -- display of fiscal responsibility by the U.S. government. During the Great Recession, when millions were out of work, the government ran a big deficit in an effort to stimulate the economy. But as the economy recovered, higher taxes brought in more revenue and spending was reined in. Incidentally, this is exactly what standard Keynesian economic policy suggests. There's even an argument to be made that the government turned to austerity too soon, and made the 2012 recovery a bit slower than it could have been.

To see how government borrowing has been curbed, look at a graph of the rate of growth of the ratio of federal public debt to gross domestic product:

When this growth rate is positive, the debt is growing unsustainably. When it's negative,  indebtedness is shrinking. Note how the U.S. has swung into sustainable territory for the first time since the late 1990s.

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