Nighttime Must-Read: Paul Krugman: Debt Shall Have No Dominion

Paul Krugman: Debt Shall Have No Dominion: “Nick Bunker notes an important point…

about the CBO…. The budget office has marked down its estimate of long-term interest rates, reflecting the growing evidence for a secular downshift in the ‘natural’ rate… [and] declared an end to the debt spiral…. Change in debt/GDP = (debt/GDP)*(interest rate – nominal growth rate of GDP) – primary surplus/GDP…. We turn to Table A-1 on page 104 of the CBO report, and we learn that for the next 25 years CBO projects an average interest rate on federal debt of 4.1 percent and an average growth rate of nominal GDP of 4.3 percent. And this means no debt spiral at all…. I don’t want to say that debt doesn’t matter at all. But it clearly matters a lot less than the fearmongers tried to tell us…

July 17, 2014

Connect with us!

Explore the Equitable Growth network of experts around the country and get answers to today's most pressing questions!

Get in Touch