During the second half of 2005, the savings rate went negative. In other words, in the aggregate, Americans spent more than they earned. Sure, lots of households do that every year, but this was the first time since 1933 that it happened for American households as a whole. It makes sense that, during the Depression, people would try to maintain consumption as incomes collapsed. But in 2006, with our economy nowhere near being in a depression, it's a pretty strange thing. Economists don't know for sure, but it probably means that the upper-income households, who used to do almost all the saving (lending part of those savings, through the magic of the financial markets, to those below them in the income distribution) are themselves now also borrowing.

From the late 1940s through the early 1990s Americans saved an average of 8 percent of their after-tax income. That rate started eroding in 1992, and now we're saving less than nothing. (Economists call this: "dissaving," which means either drawing down on savings, or borrowing.) In the past, much of this borrowing was with credit cards. Since about 2000, though, the real action has been in home equity credit.

Refinancing old high-interest mortgages with new low-interest ones has been the rage for the last few years, but it's little appreciated exactly what that means. Typically, people tack on additional principal to their mortgages when they refinance, and they take that increase in cash. Estimates of what are often called cashout refis are huge. Goldman Sachs concludes that some $2 trillion was extracted in the first five years of the new millennium. David Rosenberg of Merrill Lynch considers that about 40 percent of the growth in consumption over the last three years has come from this source.

And where does the money come from, if the upper classes aren't saving enough to fund the needs of their servants? Foreign investors, mainly Asian central banks, notably those of China and Japan. The Asian economies are rolling in greenbacks because we import so much more from them than we export to them, so they take that surplus of dollars and buy U.S. Treasury bonds and other securities with them. When you import more than you export, you're essentially living beyond your means, having to borrow the difference, which is exactly what the U.S. is doing. Or as former Clinton economic adviser Laura Tyson memorably put it: Asia lends, America spends.

The result is the graph you see above: a massive increase in U.S. foreign debt. At the end of the third quarter of 2005, Americans owed the outside world $4.3 trillion more than the outside world owed Americans. Even by the standards of the U.S. economy, that's a lot of money.

AN UNSUSTAINABLE PROMISE—So this is the Bush economy: huge tax cuts for the rich, stunning increases in corporate profits, belt-tightening for the poor, stagnant wages for most workers, and massive borrowing to keep the whole thing afloat. If the U.S. were an ordinary country, Washington would be dispatching the International Monetary Fund (IMF) to impose an austerity program. But the U.S. is not ordinary, and no one is about to engineer a deep recession, which is what the IMF would prescribe (as it did in Mexico in 1995 and Thailand in 1997).

None of this looks sustainable. With job and wage growth weak, consumer spending has been maintained through reckless levels of borrowing against house prices that have been rising at an unprecedented rate. And with domestic savings now nonexistent, that borrowing has been funded by $2 billion to $3 billion in fresh borrowing from abroad every business day. It looks like something is going to break: Either there will be some sort of financial crisis that will interrupt the gusher of foreign money, throwing the economy into reverse, or some gentler version of that crisis will evolve, spread over the course of years.

Remarkably, almost no one seems seriously concerned about this. Certainly not the president, who laced his State of the Union address with implausible pledges to reduce oil consumption and increase R&D spending (almost literally at the same moment the Energy Department is going to begin layoffs at its National Renewable Energy Laboratory, thanks to budget cuts). This is a very odd state of affairs for a Republican Party that likes to talk about security and prudence. But as we know from its foreign policy, facing reality is not the party's strong suit. And someday Bush will return to Crawford (or more likely Houston, when scenes of frequent brush-clearing won't be needed to reinforce his manly image), and the rest of us will have to face the consequences.