Tony Fratto: Paper or Plastics?  At Least Treasury Borrowing Could Spur Jobs for Debt Sellers.

Mr. McGuire: I want to say one word to you. Just one word.
Benjamin: Yes, sir.
Mr. McGuire: Are you listening?
Benjamin: Yes, I am.
Mr. McGuire: Plastics.
Benjamin: Just how do you mean that, sir?
(The Graduate, 1967)

Four decades later, which one word of advice would Mr. McGuire whisper into young Benjamin’s ear?

Probably not “plastics.”

After the wrenching upheaval in credit markets, millions of Americans are becoming increasingly wise to the perils of overextending their household balance sheets by maxing out on plastic credit cards. And even if they wanted to, banks and credit card companies have restricted the availability of credit to consumers and businesses in order to align their own balance sheets with capital levels.

No, if Mr. McGuire wanted to direct Benjamin to an sector badly in need of an enterprising, young go-getter today, he’d instead advise “paper” – as in Treasury paper -- the trillions of dollars of bonds and notes the federal government needs to sell in the coming decade to, ironically, pay for the overextended U.S. federal balance sheet.

The White House and the Congressional Budget Office finally released their mid-session economic and budget estimates this week, and despite the rhetoric of fiscal responsibility and a commitment to budget rules, there’s no escaping the bottom-line whopper projecting federal red ink of more than $9 trillion dollars in fresh debt over the next decade. Even late in the 10-year budget outlook -- long after the economy recovers, the stimulus spending ends, and financial rescue dollars are returned (or lost) -- annual fiscal deficits will still approach a trillion dollars a year.

And the explosion in the supply of paper isn’t just coming from the U.S. Foreign governments are also stepping up official borrowing to finance their own expanding budgets.

So jobs selling paper should be aplenty. The scary question is, “Who will be the buyers?”

With U.S. households deleveraging and increasing the savings rates, the need for overseas official borrowing lessens to a degree: The more we, in the aggregate save, the less we need to borrow from foreign surplus savers like China. But U.S. savings could revert to trend as quickly as the rate ramped up, exceeding our ability to finance our debt at reasonable rates.

And reasonable rates matter. U.S. Treasury paper is the benchmark for all other debt, not only because of confidence in the America’s commitment to back it, but also because the ample supply is efficiently traded in deep and liquid markets. Our cost of borrowing is relatively low, but those rates will rise if demand for our paper wanes – and that’s more likely in a world awash with a tidal wave of official borrowing.

Money costs money, and that money has to be paid back. The more it costs, the more is subtracted from growth in the future – unless we borrow to finance very high productivity investments generating returns greater than the long-term cost of borrowing. That’s not happening. Instead, we’re borrowing to finance immediate consumption on projects like road maintenance and subsidized sales of existing homes and autos.

The projected tidal wave of debt over the next decade exceeds by multiples the levels considered damaging by economists, including White House advisor Larry Summers, and is the single most important threat to America’s standard of living in the coming decades. But at least it would keep Benjamin fully employed and with lots of product.

Tony Fratto is a CNBC on-air contributor and most recently served as Deputy Assistant to the President and Deputy Press Secretary for the Bush Administration.