The 2001 and 2003 tax cuts during the Bush administration, combined with increased spending for the Iraq and Afghanistan wars and the new Medicare drug benefit, resulted in the largest and fastest fiscal deficit turnaround in 'peacetime' history. (That effort grew out of the 2001 recession and dot-com bubble.) Alan Greenspan, Federal Reserve Chairman at the time, played a very harmful role by supporting the 2001 tax cuts, giving political cover for the Bush administration claims that the tax cuts wold be self-financing (aka Laffer Curve). This borrowing was acerbated by borrowing to finance the housing boom and our merchandise and energy trade deficits. The effects of these combined debt crises are exacerbated by the current U.S. political impasse - fed by short-term expediency, economic demagoguery and ideology instead of fact-based decision-making, China's unlikeliness to support continued borrowing at past levels, and the fact that much of the debt was used to create a speculative bubble instead of raising profitability/productivity.
Federal government spending was also consumption focused - on health care spending that far exceeds that of our strongest competitors, defense spending exceeding that of the rest of the world - combined, and education spending that has increased at all levels without benefit. Meanwhile, our infrastructure was largely ignored - estimates are that we've accrued about $5 trillion in 'deferred maintenance.' That's in addition to the $5 - 7 trillion in new foreign debt incurred just between 2001-07.
We have lost the opportunity to maintain or strengthen our economic position during the first decade of the new millennium; the fear now is that we will lose the second. Our recovery is lagging, our trade imbalances unabated and unaddressed, and political gridlock over who will bear the burden of adjustment has become the order of the day. Cries of 'class warfare' have become commonplace, bolstered by the fact that unemployment among the top one-third is barely 4%, vs. 4X that for the lowest one-third. (Tax increases, stimulus spending, and increased regulation are blocked.) This is partly facilitated by the fact that borrowing costs are at their lowest levels ever, and as of yet there is no forced adjustment from the outside - as there is in Europe.
The U.S. entered this situation believing it was part of a normal economic cycle that would soon end. The authors, unfortunately, are among the many that believe increased spending on education will pay for itself in the long run - reality is that the U.S. has quadrupled inflation-adjusted per-pupil spending since the early 1970s, with very little, if anything to show for it. Similarly, college/university education costs have risen at rates 4X that of the CPI, for decades. Worse, the long lead times involved in successfully improving education outcomes would likely preclude taking other actions that hopefully would be more useful. The authors conclude that our debts won't go away anytime soon.
The authors' recommendations include regulatory reforms and genuine economic discipline. Unfortunately, most Americans have not experienced austerity since the WWII/Korean War era, and it has proven impossible to-date to unify the nation behind any direction. Stimulus efforts have delayed confronting this new reality. (Standard & Poor's downgrading America's credit rating is symptomatic of the delays.) Other nations' continued willingness to absorb dollars has also helped, but cannot continue in perpetuity - especially with China nervous about its existing dollar holdings (the dollar has lost about 25% of its value over the last 5 years) and jockeying to give its currency a larger role. (This influence is also currently mitigated - by the Greek etc. debt crisis creating a surge of investment in the U.S. as a safe haven.)