Our National Debt Denial

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The U.S. has avoided a debt crisis for decades. That doesn’t mean it can’t happen, absent real policy changes.

NRPLUS MEMBER ARTICLE D oes debt matter? As the Biden administration and its economic cheerleaders prepare ambitious spending plans, a radical new idea is spreading: Maybe debt doesn’t matter. Maybe the U.S. can keep borrowing even after the COVID-19 recession is over, to fund “investments” in renewable energy, electric cars, trains and subways, unionized public schools, housing, health care, child care, “community development” schemes, universal incomes, bailouts of student debt, state and local governments, pensions, and many, many more checks to voters.

The argument is straightforward. Bond investors are willing to lend money to the U.S. at extremely low interest rates. Suppose Washington borrows and …

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John H. Cochrane is the Rose-Marie and Jack Anderson senior fellow at the Hoover Institution at Stanford University. He is also an adjunct scholar of the Cato Institute, among many affiliations. He authors the “grumpy economist” blog. All opinions are his own, and not necessarily those of the Hoover Institution or Stanford University.

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