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.

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Does The National Debt Matter? | What's Next For The U.S. Economy

[CNBC]

What do you think about the national debt? Do you agree or disagree with the experts in the video? Is there someone else you’d like us to interview for What’s Next? Subscribe to CNBC and let us know what you think in the comments below.

[mattbowdenuh]

I love how everyone in government is a Keynesian during a recession or crisis, but forgets the other part of Keynesian economics during growth or boom periods. You're supposed to cut spending and raise taxes during growth periods so that you can expand spending and induce demand during a recession. Without the second part, you'll never reign in any spending or debt, you'll simply be trying to stay in office every election cycle....

[justpete]

“Britain came out of the war with a debt of 250% of GDP and nothing bad happened”
... Are you mad?

Rationing lasted for almost a decade afterwards - even longer than Germany.

The Beatles were writing about the effect of the tax rate in the sixities and the long term effect on industries came to a head in the seventies.

It was only the discovery of North Sea oil and gas that bailed the U.K. out.

They didn’t finish paying WWII debt off until the mid-2000s when the country’s role in the world had been completely diminished.

I don’t think that will be acceptable to most Americans.

Economists need to stop thinking something is right just because it came out of their mouth.

[Yaxez]

"Don't worry peasants, we have this toootally under control.. "

[nolanbeardy]

IRS: "Pay your taxes or go to jail!" Government: "Do not worry about our national debt we got millions of people that pays taxes money just keep coming"

[austin]

Wish I could run a debt like the government, but if I did I’d be in court everyday the rest of my life

[johnmulcahy]

As long as enough people keep believing the system works then everything is peachy 😅

[seannotaro]

This is absolutely absurd! It does matter as the dollar loses its purchasing power as the printing press continues. Mega transformational changes are taking place.

[aaraar]

Get your story right the great Britain had to dismantle its empire because of its debts

[Jeffcrocodile]

debt is fine until it isn't, there is always a tipping point. It just needs for the US to stop being the world currency and be replaced for any other currency for the debt to become a problem.

[tonys]

Simple. The US will never payback its debt not happening. As for deficit, printing money for fun.

[reecedrystek]

Just imagine going to your financial planner and telling them I make $2, 000/month and spend $3, 000/month, but Paul Krugman tells me deficits don't matter and the real danger is that I'm not spending enough.

[markyouneva]

"Does the Nat Debt Matter?" Only if you're a "fiscal conserative" and there's a Democratic President, then Yes. If there's a Republican president, then No. Blank checks to Wars and tax cuts for the ultra wealthy. Economic armageddon during COVID with tens of millions suffering, republicans: national debt.. we can't saddle our kids with debt, blah blah

[Glenacus]

you cant compare a company taking a loan and buying a factory and a government taking a loan and buying some schools computers. If the company cant pay its bills, the factory can be seized and sold to recoup that loss to the lender. How are you going to seize property from the happens is massive inflation then everything suffers

[raunakthakur]

Scientists: Think and do
Economist: Do and think

[Danny_Handford]

The answer to the question is YES! The national debt matters! I was well into my forties when I first started to learn how money is created. At first, I could not believe it. This was not what I was taught about money in my younger days. I had to earn it the old fashion way by working 8 to 12 hours a day for a paycheck. To me the most stunning realization was that modern money is created by issuing loans without having the physical money to loan but by manufacturing fake money either by printing paper money or by simply entering the digits into a bank account or computer. In other words, pretending to lend money but expecting to be paid back with money that actually exists and to add insult to injury paid back with interest. When creating money from debt was accepted as a legitimate way to do business in the free market, the flood gates were open and it was “smoke and mirrors” from that point on regardless if it was the government, the central banks or the commercial banks or even private business giving out the fake loans to create money by putting people, businesses and governments into debt. This is essentially a Ponzi scheme since more money needs to be created to continually pay off the ever increasing debt. The only chance this kind of money has of ever being paid back is if the economy is continuously growing and creating money this way is also used to force the economy to grow. Throughout history all money that was created this way eventually became worthless as a result of hyperinflation which destroyed the economy and the wealth of the nation.

The idea and thinking that the economy always has to grow for humans to progress and to be successful may be the problem. Presently if the economy is not growing, it is considered a failure. This type of thinking cannot go on uninterrupted on a finite planet with finite resources. There needs to be flexibility in the system for the economy to expand and contract and for a contraction to be considered normal and not a problem. For this type of thinking to work, there needs to be some new economic models developed along with some new types of money and financial systems based on economic sustainability not on economic growth and money inflation.

Presently, to create incentives to keep the economy growing, the money supply is continuously inflated by pumping more and more money into the system. This is done by promoting and creating more and more debt especially government debt which of course needs to be paid back with interest by future generations. When the economy is continuously growing, the amount of money representing the value of the economy which is the Gross Domestic Product (GDP) also has to continuously increase. As more money in the form of debt is created, the resulting growth rate in the economy and GDP becomes lower and lower as more and more debt is created. In an effort to keep the economy growing, the debt will quickly increase to more than the value of the GDP and when the debt becomes several more times than the value of the GDP, it will not be possible to ever pay back the debt and the system collapses with the value of the money going to zero. When this happens, the system is reset and the cycle is repeated. During the run up and then the reset, there will be some winners but there will be mostly losers with many casualties and war is also a possibility. This cycle has been repeating continuously throughout history from the Chinese Dynasties to the Roman Empire to Germany after World War One and to Argentine in the 21st century

[PlayNiceFolks]

What I got from this:
It's not a problem
- another few billion in debt

It's only a short term problem
- multiple trillions in debt

Don't worry about it
- tens of trillions in debt

What's next?

[ACantu-depg]

The US is unable to pay the interest on the national debt from collected taxes alone. So what do they do instead? They pay their creditors by printing money and using that to pay them.
What does this mean for you and me? Your money is worth less then it would if they weren't printing money. So yeah, it's kind of a big deal.

[Mondrayish]

Look folks, it's not that complicated.

1. Fed printer go brrrr
2. Receive stimulus checks
3. Buy food and drinks
4. Repeat

[eeriewaffle]

WE SPEND MORE MONEY ON INTEREST PAYMENTS THAN WE DO ON THE Enough