Planet Money How much national debt is too much?
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Jun 7, 2024 Dive into the tangled web of national debt and its effects on economic growth. Notably, a pivotal 2010 study identified a striking threshold: national debt surpassing 90% of GDP can slow growth significantly. The podcast also explores debates between 'deficit doves' and 'deficit hawks,' examining the pros and cons of increased government spending. Current U.S. debt stands at a staggering $26 trillion, raising urgent questions about sustainability and policy responses amid changing economic landscapes.
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Debt surge after 2008 financial crisis
- After the 2008 financial crisis, the US government responded with massive spending, increasing national debt from $6 trillion to $11 trillion by 2012.
- This led to concerns about the debt's impact on future economic growth.
Uncertainty in policymaking
- Policymakers face difficulty making real-time decisions about government spending without knowing the future impact.
- Karen Dynan uses the analogy of "inching out on ice" to describe this uncertainty.
Reinhart-Rogoff study
- Reinhart and Rogoff's 2010 paper suggested that economic growth slowed when national debt exceeded 90% of annual GDP.
- This finding significantly influenced the debate on debt and growth.