The last-minute budget deal reached in Washington cut $38 billion from U.S. federal spending. That's great. But in the week before the deal was reached, the United States went deeper into debt to the tune of $54 billion. The U.S. government isn't just having to run faster and faster to stay in the same place. It's running faster and faster and still falling behind.

And next month we shall go through it all again, when the U.S. Congress will be asked to agree to raise the $14.25 trillion debt limit. This seems likely to trigger another of those macho political standoffs that the world watched in disbelief last week.

But the politicians of Washington aren't alone. We have seen similar querulous displays in Europe, where the assembled leaders seem unable to resolve the problems of the euro.

A year ago in the spring it was a bailout for Greece, on terms so tough as to make it almost impossible for Greece ever to repay. Last fall it was Ireland's turn for a bailout on similar punitive terms. This spring Portugal got the same deal with the same harsh medicine and the markets are now waiting to see when and if Spain goes the same way in the autumn.

Japanese politicians are no better. They had their housing crash and consequent financial crisis 20 years ago and so badly mishandled the event that it turned into Japan's "lost decade." The economy stopped growing. But then the lost decade turned into a lost generation because the economy stubbornly refused to grow.

Twenty years ago, Japan was being hailed as the world-beater, poised to overtake the United States as the biggest and most productive economy. It was producing 15 percent of global gross domestic product. These days, Japan is producing about 8 percent.

These are three examples of pitiful political performance from the governments of the Group of Seven countries and there are many different theories to explain why. Some suggest that democracy is inherently flawed, since voters will refuse to vote to cut their own benefits even when society cannot afford them. Some say that it is the fault of campaign finance, or television, or voter apathy or lobbyists.

No doubt they all played a role but the real explanation is simpler. It was pretty easy to govern from the 1950s to the 1990s all across the G7 countries because the fundamental conditions were favorable. There were lots of people in the labor force and lots of children being born who would soon join the labor force and start consuming. And there were relatively few old people whose pensions and healthcare had to be paid for.

As a result, it was the task of the happy politicians of those days to distribute the proceeds of economic growth. Almost all the interest groups could be kept happy by doling out public spending.

Now from Paris to Peoria, from Tokyo to Toronto and from Munich to Manchester, the baby boomers are retiring all across the G7 countries. The costs in pensions and healthcare are going through the roof but our smaller and older labor force isn't producing much growth and therefore not delivering ever-increasing tax revenues. It is therefore becoming very difficult to govern.

Rather than give up the pleasure of spending other peoples' money, our politicians have chosen to increase debt rather than court unpopularity by raising taxes. But this recourse is coming to an end.

The Bank of International Settlements recently ran the numbers to show how much governments would have to cut spending in future just to get back to the already high levels of sovereign debt back in 2007. Japan would have to have a budget surplus of 6.4 percent of GDP every year for the next 10 years. The United States and France would have to generate surpluses of 4.3 percent of GDP for the next 10 years.

The likelihood of the G7 political class having the courage to do so is slim, so they will probably wait and dither until their hands are forced by events or crises or disasters. But the underlying demographic forces won't be ignored. The number of people worldwide over the age of 60 is going to double in the next 20 years and by 2050 they will account for almost one-third of the human race. The older they are, the more their healthcare will cost.

If our politicians think their lives are miserable these days, they ain't seen nothing yet.

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