Tangle PREVIEW - Isaac talks with Noah Smith.
Aug 7, 2025
Noah Smith, an economist and writer behind the blog Noahpinion, dives into the pressing issues surrounding U.S. debt and deficit in light of recent legislation. He discusses changing perceptions of national debt and the implications of rising interest rates. The conversation highlights the historical context of government borrowing and the balancing act between fiscal responsibility and inflation. Smith also explores how past administrations have shaped today’s economic landscape and the political ramifications tied to these financial policies.
AI Snips
Chapters
Transcript
Episode notes
Impact of Rising Interest Rates
- Rising interest rates increase government debt servicing costs as old debt matures and needs refinancing at higher rates.
- The era of permanently low interest rates ended, signaling a challenging fiscal environment ahead.
Debt Mismanagement Over Decades
- Past administrations failed to pay down debt during good economic times, leading to a new political equilibrium of persistent deficits.
- Policymakers wrongly bet interest rates would stay low indefinitely, but they're now rising, increasing debt costs.
Inflation as Debt Erosion Tool
- Inflation erodes real value of debt and raises government revenues through higher nominal prices and taxes.
- Lowering interest rates to generate inflation could ease debt burden but risks unpopular inflationary consequences.