EconoFact Chats On Debt, Fiscal Crises, and AI
Nov 16, 2025
Greg Mankiw, a Harvard economics professor and former Chair of the Council of Economic Advisers, shares insights on pressing economic issues like the federal debt and potential fiscal crises. He argues that higher taxes are likely the solution to rising debt, while warns against the risks of politicizing the Federal Reserve. Mankiw discusses market signals indicating fiscal concerns and raises skepticism about AI's true effect on productivity growth. He emphasizes creativity in using AI, suggesting students draft original ideas first.
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Growing Out Of Debt Is Ideal But Unlikely
- Faster economic growth is the best way to reduce debt burdens but is unlikely to fully solve current fiscal imbalances.
- Greg Mankiw expects normal CBO-style productivity and lower population growth, so growth alone won’t be enough.
Prepare For Higher Taxes Ahead
- Expect higher taxes over time because monetization and repudiation are costly and unpopular options.
- Plan for future generations to face higher tax burdens to finance entitlements like Social Security and Medicare.
Fed Independence Is Key To Avoid Monetization
- Politicization of the Fed raises the risk that fiscal pressures lead to monetization and high inflation.
- Mankiw warns central bank capture can quickly produce costly inflationary episodes.
