New York Times columnist Paul Krugman argued Tuesday that the nation’s $21.5 trillion national debt doesn’t matter these days, because the average interest being paid on the debt is below the rate of growth of the economy.
“I’m not saying that we shouldn’t worry about debt at all, because there may be future contingencies when real interest rates rise and debt becomes an issue,” he wrote Tuesday. “But debt is way, way down on the list of things to worry about — absolutely trivial compared with, say, crumbling infrastructure, which should be fixed without worrying about paying as you go.”
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He said that means there’s even less reason for anyone to “obsess over government debt.” Krugman said that those who worry about it warn that higher debt means higher interest payments and a faster-growing national debt.
“But this kind of debt spiral can only happen if the interest rate on the debt is higher than the economy’s growth rate,” he wrote. “And this hasn’t been true for a while.”
He noted that the average interest paid on the debt has averaged less than three percent since 2010 or so, and said even just 2 percent growth plus 2 percent inflation is higher than that.
“What this means is that debt doesn’t spiral,” he wrote. “On the contrary, it tends to fall as a share of GDP unless the government runs large primary deficits.”
Krugman has argued for years that the federal government should have borrowed more money more quickly to deal with the Great Recession. Under President Trump, a deal was struck to boost federal spending by about $300 billion in 2018 and 2019, which has upset conservatives who say the U.S. is headed back to $1 trillion annual budget deficits.
