Date posted: May 30, 2013
The current national debt is over $16 trillion. Some say it represents our biggest economic problem. Do we ultimately have to push this debt down to zero? N.C. State University economist Mike Walden responds.
“Most economists would actually say no to that question. And they would say no for a couple of reasons.
Number one: unlike a person or a company, the government – here, the Federal Government — is long lasting. Presumably it’s never going to end. It has an unlimited life so that debt can be forwarded, can be rolled over to future generations.
The other point would be that economists argue that you need to look at the debt relative to the ability of the country to carry that debt. Just like, for example, if you met someone who told you they had $10,000 debt. If that person was only earning $10,000 a year, that would be a problem. If they were earning $1 million a year, it wouldn’t be a problem.
So, what economists focus on is the debt relative to the size of the economy, GDP. And that has gone up. It’s gone from about 60 percent in 2007 to around 100 percent today.
That’s what economists say we need to focus on, and many economists argue we need to get that 100 percent going the other way, going down. It doesn’t have to go to zero, but it probably needs to go to some lower level, and I think that’s what most of the debt plans that we look at try to do.”
Category: Economic Perspective