Saturday, August 17, 2024

The US government has to start paying for things again

 This is a pretty good article by Vox: https://www.vox.com/policy/367278/us-national-debt-gdp-government-inflation-solutions-recession

Smetters and his colleague Jagadeesh Gokhale have after extensive modeling concluded that if US debt held by the public exceeds 200 percent of GDP, we’ll be entering a phase where no amount of tax hikes or spending cuts will be sufficient to avoid default. We’ll either have to explicitly say we will not pay back all our debt, or else inflate it away, both of which would have massive negative consequences for American workers and consumers. They estimate that the US will reach this point in about 20 years.

Note: I have used a 150% of GDP.  I am ok with using 200% of GDP so long as it includes other liabilities, not just the public marketable debt.


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