0:00

N P R. Dairy

0:13

In I heard you made a special

0:15

trip to Times Square last week. I

0:17

did are in for her clothes.

0:19

I'm standing here looking up at

0:21

this sign cold our National Debt.

0:24

Okay so you pick to be nerdy as

0:26

sign in Times Square to look at? Of

0:29

course I felt this National Debt

0:31

sign on a side street is

0:33

kind of hit in between two

0:35

restaurants Burger and Lobster and Mermaid

0:37

Oyster Bar. Oh, sounds decadence

0:39

and so is our spending. I

0:41

assume the numbers pretty high. It's.

0:43

Rising up and up and art

0:46

in bright yellow letters. So

0:48

what are we up to? Now where? Reproaching?

0:50

You know one hundred percent of gross domestic

0:52

product. The on my measure the Us

0:54

government has a collection of I use

0:56

adding up to about a year's worth

0:59

of Alpert. On that day the number

1:01

was more than thirty four trillion dollars

1:03

and I asked the people passing by

1:05

to look up at the sign and

1:07

tell me what came to mind. Wow!

1:10

That's crazy. I think it

1:13

is concerning the ads ceremony.

1:17

A lot of many max. This is the

1:19

indicator from planet money. I will in one.

1:21

And I'm dirty words that are

1:23

the show. The big number hanging

1:25

over all Americans, the Federal Debt.

1:27

Is it time to freak out?

1:30

Or is there nothing to see

1:32

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2:45

Governments accumulate debt when they're spending

2:47

outstrips the money they're taking am

2:49

so sick can get higher from

2:52

things like increase spending during Cozad

2:54

or through reduced revenue bikes with

2:56

their two thousand and seventeen tax

2:58

cuts and or then President Trump's.

3:01

At the moment, the Us that

3:03

is close to the highest it's

3:05

ever been as a share of

3:07

gdp, and globally it's fourth highest

3:10

among advanced economies behind Japan, Greece,

3:12

and Italy. And. One general theme

3:14

that critics of the debt bring

3:16

up is that this encourages wasteful

3:19

spending. Take interest payments. My of

3:21

a Guinness is that President of

3:23

the Committee for a Responsible Federal

3:25

budget and sees our debt hawk.

3:28

Interest. Payments this year will actually be

3:30

larger than National Defense spending for the first

3:32

time, and that's not a small number. Know.

3:35

That's not a mother My Physics: Whether

3:37

you think we spend too much or

3:39

too little on National Defense, that is

3:41

one of the largest items in the

3:43

entire federal budget. About six thousand, six

3:46

hundred dollars. Per. Household. I

3:48

mean, Sore. Martha Gimbel

3:50

cofounded The Budget Lab sees Er det

3:52

does I think it gets. to the

3:55

question of why we took out that dead in the

3:57

first place and did we think it was a good

3:59

idea to time So if

4:02

you are going into debt to, for instance,

4:04

buy a house that you and your family

4:06

are going to live in for many years, that

4:08

can be a reasonable investment that's going to have

4:10

payoff for you. If you're

4:13

going into debt to go

4:15

to Disneyland, that's probably just

4:17

going to cause problems for you

4:19

down the line. But Maya, our

4:21

debt hawk, doesn't believe all the

4:23

government spending has been investments that

4:25

will pay off in the future.

4:28

The bulk of the government's money goes

4:30

to consumption. Over 80% goes to consumption,

4:33

not investment. In

4:35

other words, no more than 20% of

4:37

government spending typically goes to things

4:39

like railroads, public health research, and

4:42

retraining for veterans. You know, investments

4:44

that might improve prosperity in the

4:46

future. The rest goes to things

4:48

like unemployment benefits, social security, and

4:50

Medicare. And Maya's not saying

4:52

the government shouldn't spend money on these

4:54

things per se. In fact,

4:56

she says borrowing and spending can be

4:59

really useful in a downturn. The smart

5:01

times to borrow are when your

5:03

economy is operating below capacity.

5:06

The most recent and painful example was

5:08

COVID. Thank goodness we were

5:10

in the condition that we were able to

5:12

borrow trillions and trillions of dollars, and that

5:14

really saved the economy. But

5:17

you don't want to borrow when there's no reason to.

5:19

And for instance, the three years under the

5:21

Trump presidency before COVID hit, we

5:24

were borrowing for basically everything, and that didn't make

5:26

sense. That was running the economy hot. The

5:29

2017 Tax Cuts and Jobs Act

5:31

meant that without corresponding reductions in spending,

5:33

the government had to borrow more than

5:35

it otherwise would have. And

5:38

now that we're through COVID and we have inflation,

5:40

we're still borrowing, adding most of

5:43

our policies by financing them from

5:45

debt. And that makes inflation worse, and that

5:47

has a whole lot of other negative effects.

5:49

So there are lots of times you should

5:51

borrow right now from an economic perspective, it's

5:54

definitely not one of them. And that

5:56

brings us to the second main concern that people

5:58

might have around the national. debt? Fairness.

6:02

Is it really fair to pass

6:04

along our pile of AOUs to

6:06

future generations? First

6:08

off, debt critic Maya. The truth is,

6:11

if we borrow, it's

6:13

more complicated but not much more

6:15

complicated than saying, we want to

6:17

do a lot of things today and we don't want

6:19

to pay for them, so we're going to ask our kids to

6:21

pay for them. Basically, it's a lot

6:23

of parents saying, here's the spending we're going

6:26

to do and here's the bill we're passing

6:28

to the future. On the other hand, Martha,

6:30

our debt dove, thinks this could be fair,

6:32

depending on the type of spending. I mean,

6:34

I think that gets back to the value

6:36

for money question, right? So if

6:38

I'm my grandchild and

6:43

we spend a lot

6:45

of money on fighting climate change

6:48

and creating the conditions

6:50

for the United States economy to grow

6:52

really strongly, I think

6:54

she'd be pretty happy about that. If

6:56

we blew her inheritance

6:59

on several weekends in Vegas,

7:02

I think she would be mad. Now,

7:04

we could argue forever about whether

7:06

what the government currently spends its

7:08

money on represents investments that our

7:10

children and our children's children would

7:12

be happy with. But regardless of

7:14

what the debt paid for, there

7:16

is the possibility that it just

7:18

gets too large and the US

7:20

government defaults on payments. Maya,

7:23

our debt hawk, actually

7:25

is not too concerned here. You

7:28

know, I don't worry about a crisis because

7:30

the United States of America is incredibly unique

7:32

when it comes to our fiscal situation. We

7:35

borrow in our own currency. That's what makes us

7:37

different than other countries that might have a huge

7:40

fiscal crisis. And we are the reserve

7:42

currency of the world. So even when there is a

7:44

big recession, we're usually able

7:46

to borrow without concern because people

7:48

buy US Treasuries. She's talking

7:50

about what's sometimes called exorbitant privilege.

7:53

When, and kind of

7:55

especially when the world is in turmoil, people

7:57

turn to the US dollar and buy US

7:59

Treasuries. Martha, who's fairly

8:02

relaxed overall, concurs. I

8:05

am not concerned about

8:07

a fiscal crisis. Tomorrow, I'm

8:09

not concerned about a fiscal crisis in a

8:11

year. But even though you

8:14

could say Martha is a debt dove,

8:16

she does raise a type of fiscal

8:18

crisis that worries her. And

8:20

it's not necessarily that the debt is

8:23

too high. I would

8:25

become a lot more concerned

8:28

if political dysfunction

8:31

and political risk increases.

8:34

When you've seen some of the credit ratings

8:36

agencies downgrade, U.S. debt, one of the things

8:38

they've mentioned is political risk

8:40

in the United States. All

8:42

the brinkmanship around the debt ceiling really

8:45

concerns Maya, too. In the past,

8:47

it served a very productive purpose, where often at

8:49

the same time they lifted the debt ceiling, they

8:51

put in place measures to improve the debt. But

8:53

it no longer does, because people start to threaten

8:55

to default, and that is a dangerous idea we

8:57

shouldn't even be talking about it. OK,

9:00

we'll zip it up now. But

9:02

in any case, it's something that Maya and

9:04

Martha agree on. Maya says

9:06

they probably have a lot of commonalities.

9:09

Oh, I think there's probably as much that we agree

9:11

on as that we don't in the fact that I

9:13

don't think we think there's a crisis. I do think

9:15

we would think that public investments make a lot

9:17

of important sense. Two quite

9:20

different perspectives unified in being pretty

9:22

chill about the prospect of any

9:24

imminent default. Both make

9:27

the case that we should debate

9:29

taxes and the quality of government

9:31

spending, while not making that debate

9:33

so toxic that investors lose faith

9:35

in the U.S. government. There

9:40

is also that doomsday clock. What's

9:42

that one counting to? Like nuclear apocalypse. Is

9:44

that nuclear apocalypse? Yeah,

9:47

basically. Yeah,

9:49

we could do that next week on other things

9:51

to worry about, or nuclear warfare.

9:55

There you visit the doomsday clock and eat at the

9:58

Whole Foods. Another Guided tour around. The

10:00

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