Global Courant 2023-05-23 08:56:12
Frank Robichon/Reuters
The US government does not have to pay off its $31 trillion debt, Paul Krugman said.
The national debt cannot be compared to something like a household’s finances, Krugman said.
“If governments go into huge debts for some reason, it’s unusual, as far as I know, to pay off those debts.”
According to top economist Paul Krugman, the US does not actually have to pay off its mountain of debt of $ 31 trillion. on a number of obligations.
While individual borrowers are expected to pay off debt, the same is not true of governments, Krugman argued in a column for the New York Times on Friday. That’s because, unlike humans, governments don’t die, and they gain more revenue with each passing generation.
“So governments have to pay off their debts — pay interest and repay the principal when bonds mature — but they don’t necessarily have to pay them off; they can issue new bonds to pay the principal on old bonds and even borrow to pay interest as long as total debt is not rising too much faster than revenue,” he added.
While the debt-to-GDP hovered around 97% last year, the interest payments on that debt are just about $395 billionaccording to the Office of Management and Budget, or about 1% of last year’s GDP.
Historically, it’s also unusual for governments to pay off large debts, Krugman said. Such was the case for Britain, which largely clung to the debt it had already incurred in the Napoleonic Wars.
Krugman’s argument comes amid growing disagreement over the US debt level, with policymakers still bickering over the terms on which to raise the country’s borrowing limit. House Speaker Kevin McCarthy has said he would reject an increase in the debt ceiling any time soon unless cuts are negotiatedhave introduced a bill that would save about $4.5 trillion in spending.
Congress now has less than two weeks to raise the borrowing limit before the government may run out of money, US Treasury Secretary Janet Yellen warned. A default on the country’s obligations can result in catastrophe for financial markets, experts warn. Krugman has called for the debt ceiling to be abolishedas the risk of a financial crisis presents Republicans with a “bottleneck” in fiscal policy.
Read the original article Business Insider
