Oddbean

U.S. debt could threaten the economic growth that's needed to keep the burden sustainable, former IMF official says ========== Former IMF official warns that U.S. debt could threaten economic growth and make the burden unsustainable. Debt held by the public is already at about 100% of GDP and is projected to climb to 116% in 2034, 139% in 2044, and 166% in 2054. While an advanced economy like the U.S. can manage its debt, an institutional breakdown remains a threat. Meeting interest obligations as the debt ratio rises could require the federal government to cut discretionary spending, negatively impacting economic growth. The U.S. must keep up with interest payments and maturing Treasury bonds, with the cost of servicing all that debt expected to exceed defense spending this year. The spike in bond yields has increased interest costs. The U.S. will either borrow more to pay up and add to its debt burden or cut spending on initiatives like the Biden administration's CHIPS Act and the Inflation Reduction Act, which could have substantial negative growth effects. Nobel laureate Paul Krugman downplayed concerns about U.S. debt, suggesting that hiking taxes or reducing spending by 2.1% of GDP could stabilize the debt-to-GDP ratio. #UsDebt #EconomicGrowth #Sustainability #Imf #CongressionalBudgetOffice #BarryEichengreen #TreasurySecretaryJanetYellen #PaulKrugman #DebttogdpRatio https://fortune.com/2024/06/15/us-debt-crisis-interest-expense-economic-growth-deficit-sustainability-gdp-ratio/