Only a fantasist can say our national debt is not a crisis

by Ryan Streeter on October 5, 2013. Follow Ryan on Twitter.

It’s been a little out of fashion to worry publicly about the national debt lately, mostly due to the flap over the Reinhart-Rogoff study, but Niall Ferguson does us a service in his WSJ op-ed today by focusing on it again.

He rightly points out that the latest CBO report on the debt gives us plenty to worry about:

A very striking feature of the latest CBO report is how much worse it is than last year’s. A year ago, the CBO’s extended baseline series for the federal debt in public hands projected a figure of 52% of GDP by 2038. That figure has very nearly doubled to 100%. A year ago the debt was supposed to glide down to zero by the 2070s. This year’s long-run projection for 2076 is above 200%. In this devastating reassessment, a crucial role is played here by the more realistic growth assumptions used this year.

This is especially troubling when we consider the range of scenarios the CBO plays out in its report for the time from now until 2038:

Only in three of 13 scenarios—two of which imagine politically highly unlikely spending cuts or tax hikes—does the debt shrink from its current level of 73% of GDP. In all the others it increases to between 77% and 190% of GDP. It should be noted that this last figure can reasonably be considered among the more likely of the scenarios, since it combines the alternative fiscal scenario, in which politicians in Washington behave as they have done in the past, raising spending more than taxation.

As Fergsuon says, “Only a fantasist can seriously believe ‘this is not a crisis.'”

  • Art Patten

    Er, no, he’s wrong. Niall’s a$$ dictated that to him. (Granted, his ass sincerely believes its emanations are a public service.)

    For a sovereign currency issuer, this is a matter of (1) who has how much command over real economic resources and (2) inflation risk.

    Solvency risk is utter BS, and I suspect deep down he knows that, even if his a$$ doesn’t. But it’s hard to paint yourself out of a corner, I guess.