Does Government Debt Matter Anymore?

Published December 7, 2021

Proponents of government spending argue that the government can borrow as much as it wants, so long as the interest rate is less than the rate of economic growth. However, government deficits are far too high for this to be the case. Continuing to run large deficits will either lead to higher inflation or sharp cuts to entitlement programs. Solving the US fiscal problem will require strong pro-growth policies, a slowdown in government spending, and reforms to our chaotic tax system and entitlement programs.

Discussion Questions:

1. How does America’s current fiscal situation differ from previous periods of high debt?
2. What changes can America make to its tax system and entitlement programs to solve its fiscal problem?

Additional Resources:

• Read “r < g,” by John Cochrane. Available here (PDF).
• Watch the Hoover Institution Policy Seminar with John Cochrane. Available here.
• See if you can solve the US debt crisis with the “America Off Balance” Budget Calculator. Available here.