Does The National Debt Matter? | What's Next For The U.S. Economy
With the national debt surging past $26 trillion, we asked top economists, analysts and policy makers why the deficit matters. Paul Krugman said the deficit doesn't matter too much and said instead the great danger is that America spends too little.
Danielle DiMartino Booth countered by saying such a large debt puts U.S. sovereignty at risk and Congress needs to step up. Mohammed El-Erian said we need to win the war against the threat of a global depression and secure economic peace by creating lasting and effective policy. Robert Reich thought now is just not the time to worry about the national debt. Watch the video to hear more.
Many arguing against aggressive stimulus spending from the federal government cite one critical reason: the national debt. Now totaling over $26.7 trillion, the U.S. debt-to-GDP ratio is one of the highest in the world.
Top economics and policymakers, however, are not concerned.
When asked about the staggering number, Nobel laureate Esther Duflo told CNBC, “That is not something that the general public should be worried about for the time being at all.” She continued, explaining that American credit is one of the safest assets to hold, so in a sense, it is unlikely that the government will ever have to repay this debt.
AFL-CIO chief economist William Spriggs asked us to consider if the national debt is creating money for real economic activity. If so, like in an example where a company or governmental agency takes out a loan to build a factory thus creating jobs, then there should be no reason for alarm.
Former Labor Secretary Robert Reich feels now is not the time to be worried about the national debt for exactly the reason Spriggs mentions. “When you have this much unemployment, when you have this much-underutilized capacity; this is the time when the government has got to be the spender of last resort,” he said.
Although Nobel laureate Paul Krugman was not impressed with the current choices of government spending, he was not concerned with the spending itself. He said “even though we’ve been running budget deficits that are kind of stupid, if you were going to run budget deficits, you should be using the money to build infrastructure to help education, to work on the future. And instead, we’ve been using it to get big windfalls to corporations and rich people.”
When looking at instances where the government bails out private sector companies, take for example the $25 billion in payroll grants for the Airline industry, Dambisa Moyo argued for more collaboration between the private and public sectors to combat the growing size of the government.
Jim O’Neill did see the deficit as a problem in the long run and suggested solving the national debt crisis by giving the Federal Reserve a different target than low inflation. Danielle DiMartino Booth maintained that targeted government spending is necessary for economic recovery but worried that such an expanding debt could leave the U.S. vulnerable to bad actors in the long run.
Watch the video to learn more about why some economists think the national debt may not matter.