Planet Money
How much national debt is too much?
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.
26:50
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Quick takeaways
- High national debt above 90% of GDP may lead to significantly lower economic growth rates.
- Debates ensue on the interpretations of the 90% debt threshold and its implications for economic growth.
Deep dives
Debt and Government Spending Strategies After the Financial Crisis
In 2009, following the financial crisis, the US government focused on increasing government spending and reducing taxes to stimulate the economy. The government's strategy included bailing out banks, tax cuts, and investing in infrastructure. Initially supported, this approach faced criticism from deficit hawks concerned about the growing national debt as it escalated from $6 trillion to $11 trillion by 2012. This rapid increase in debt raised concerns about interest costs and potential snowballing effects.
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