Rethinking Government Deficits: A Different Perspective

How bad is the national debt? Just asking questions.

Our national debt—measured as federal debt held by the public—is over $27 trillion. That's approaching 100 percent of annual gross domestic product, which is higher than it's been since the end of World War II. So, are we screwed? 

Or are those of us who worry about numbers like this totally misunderstanding the nature of government debt? There's a school of thought called Modern Monetary Theory (MMT) that says economists should stop worrying and learn to love the debt because, when you think about it, the government's deficit is a private sector surplus. This is what MMTers believe.

Joining us to talk about the debt, the rising influence of MMT, and the likely trajectory of an increasingly debt-burdened country is Bob Murphy. He's an economist and author, senior fellow at the Mises Institute, and host of The Bob Murphy Show and The Human Action Podcast.

Sources referenced in this episode:

1. Federal Debt Held by the Public | St. Louis Fed
2. Federal Debt Held by the Public as Percent of Gross Domestic Product | St. Louis Fed
3. Real Gross Domestic Product | St. Louis Fed
4. Federal government current expenditures: Interest payments | St. Louis Fed
5. Federal spending | U.S. Treasury Fiscal Data
6. Just Asking Questions with Ted Nordhaus
7. Just Asking Questions with Kyla Scanlon
8. Reason TV: "Does National Debt Still Matter? America's Gamble"
9. Stephanie Kelton: "The big myth of government deficits" | TED
10. Murphy's original 2011 refutation of MMT
11. Free digital version of Murphy's book, Understanding Money Mechanics
12. The Bob Murphy Show's MMT archive
13. Murphy hosts Reason's Nick Gillespie on The Human Action Podcast

Chapters:

• 00:00 Introduction
• 01:34 What economic story does the debt tell?
• 05:28 How is this much debt politically feasible?
• 09:38 Murphy responds to Jason Furman and Keynesianism
• 14:31 The interest paid on the debt
• 17:41 Analogizing alarmism: debt vs. climate
• 26:03 Simple lesson on Social Security and entitlements
• 32:40 Responding to MMT and Kelton's TED talk
• 57:41 Why do MMTers seem so fashionable?
• 01:00:36 Libertarianism: pessimism vs. optimism
• 01:11:16 Final question

• Producer: John Osterhoudt

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