How much national debt is too much?

Planet Money

NPR

Business, News

4.6 • 29.8K Ratings

🗓️ 7 June 2024

⏱️ 30 minutes

🔗️ Recording | iTunes | RSS

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Summary

Most economic textbooks will tell you that there can be real dangers in running up a big national debt. A major concern is how the debt you add now could slow down economic growth in the future. Economists have not been able to nail down how much debt a country can safely take on. But they have tried.

Back in 2010, two economists took a look at 20 countries over the course of decades, and sometimes centuries, and came back with a number. Their analysis suggested that economic growth slowed significantly once national debt passed 90% of annual GDP... and that is when the fight over debt and growth really took off.

On today's episode: a deep dive on what we know, and what we don't know, about when exactly national debt becomes a problem. We will also try to figure out how worried we should be about the United States' current debt total of 26 trillion dollars.

This episode was hosted by Keith Romer and Nick Fountain. It was produced by Willa Rubin and edited by Molly Messick. It was fact-checked by Sierra Juarez with help from Sofia Shchukina and engineered by Cena Loffredo. Alex Goldmark is Planet Money's executive producer.

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Transcript

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0:00.0	This message comes from NPR sponsor Morgan Stanley with their podcast
0:04.1	What Should I Do with my money? Smart people don't always feel smart about money.
0:08.2	Listen to what should I do with my money to hear real people getting real help from
0:12.2	experienced financial advisors.
0:14.8	This is Planet Money from NPR.
0:19.8	Okay, we are going to start today's show by jumping into the old Planet Money Time Machine.
0:27.0	Economic Destination 2009, A time when the government was spending lots and lots of money
0:36.8	and the national debt was shooting up. Yeah, back then the US was trying to pull itself out of the recession that followed the financial crisis.
0:45.0	And one of the big strategies the government used was just to spend and spend and spend.
0:50.0	We bail out some banks, we lowered taxes, there was all this money for infrastructure.
0:55.0	Early in a recession, I think a lot of people were very supportive of the big steps the government took to increase government spending and reduce taxes.
1:07.0	That is Karen Dynan. She teaches at Harvard now. Earlier in her career, she worked at the Federal
1:12.0	Reserve, did a stint as the chief economist at the Treasury Department.
1:15.8	And Karen says it didn't take long for some people to question the wisdom of all that spending.
1:21.8	Attitudes changed, and you know there were some economists and some policy makers
1:27.4	I think particularly people we would call deficit hawks who started to get quite concerned.
1:34.0	Karen, she was firmly in the deficit dove camp back then.
1:38.0	To her, it seemed obvious that the economy was not going to get back on its feet
1:42.0	without an ongoing
1:43.8	infusion of government spending. But she at least understood the thing the Hawks
1:47.8	were afraid of. Sure, in pure dollar terms at least, the country had never taken on so much debt so fast.
1:55.7	In 2008, the gross public national debt was around $6 trillion.
	...

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