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Civitas Outlook
Topic
Politics
Published on
Jun 24, 2024
Contributors
Charity-Joy Acchiardo
Dirk Mateer
Image: Janet Yellen (Wikimedia Commons, 02/06/2025)

Contra Yellen, the Debt Isn't Sustainable

Contributors
Charity-Joy Acchiardo
Charity-Joy Acchiardo
Senior Fellow
Charity-Joy Acchiardo
Dirk Mateer
Dirk Mateer
Senior Fellow
Dirk Mateer
Summary
America’s financial health is in trouble, and while government spending continues unabated, most Americans, including politicians and others, seem too preoccupied to care.
Summary
America’s financial health is in trouble, and while government spending continues unabated, most Americans, including politicians and others, seem too preoccupied to care.
Listen to this article

America’s financial health is in trouble, and while government spending continues unabated, most Americans, including politicians and others, seem too preoccupied to care. The country’s national debt is currently 35 trillion dollars, or over $100,000 per person. And despite recent reassurances by Janet Yellen, the Secretary of the Treasury, that the “debt is sustainable,” sustainable debt makes our society less so, with the United States having a debt-to-GDP ratio of 122%, one of the highest in the world.

In the strictest sense, Yellen’s statement is correct. Yes, the United States government can afford to pay the interest on the debt given the current economic environment, but it is also wrong given the fact that the debt is making our economic well-being less sustainable by suppressing the rate of growth necessary to maintain the debt-to-GDP ratio. Economic growth occurs through investments in capital, infrastructure, and technology. Investments in large scale government projects, if spent wisely, can boost economic output, but the government can’t afford to invest as much as it could when 870 billion dollars each year go to paying the interest on the debt. How does that affect you and me? Interest on the debt is money that is dead to the economy. That dead money cannot help you get where you want to go when you are stuck in traffic, or build you a faster internet, or lower your energy bill. In each case, there is a loss of productivity. So why should we accept this outcome? More broadly, when did our society become OK with servicing such a large debt load?

Continue reading at Real Clear Markets

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