Here’s why the US doesn’t need to pay off its $31 trillion mountain of debt, according to Paul Krugman


Paul Krugman

Frank Robichon/Reuters

  • Paul Krugman said the US government doesn’t need to pay off its $31 trillion debt.

  • Krugman said government debt cannot be compared to something like household budgets.

  • “If for some reason the government is in huge debt, it’s unusual, as far as I know, to repay that debt.”

Top economist Paul Krugman said the U.S. doesn’t really need to pay off its $31 trillion mountain of debt, saying in an op-ed just weeks before the U.S. could default on its debt. He refuted the idea that it could be compared to a household balance sheet. Regarding some obligations.

While individual borrowers are expected to repay their debts, the same is not true for governments, Krugman argued in a magazine column. new york times on friday. That’s because, unlike humans, governments don’t die and earn more with each generation.

“Therefore, governments must service Their debts pay interest and repay the principal when the bonds come due, but they don’t necessarily have to pay them back. New bonds can be issued to pay the principal of old bonds, or borrowed to pay interest, as long as the total debt does not increase too much beyond the revenues,” he added.

The debt-to-GDP ratio hovered around 97% last year, but the interest payments on that debt are meager. Approximately $395 billionaccording to the Office of Management and Budget, or About 1% of last year’s GDP.

Historically, it’s also unusual for governments to pay back huge debts, Krugman said. So did Britain, which has continued to carry most of the debt it has incurred since the Napoleonic Wars.

Krugman’s claims come amid a growing debate over U.S. debt levels, with policy makers still debating the terms for raising the country’s borrowing ceiling.House Speaker Kevin McCarthy says he will reject raising the short-term debt ceiling unless spending cuts are negotiatedand proposed a bill that would cut spending by about $4.5 trillion.

Less than two weeks left in Congress US Treasury Secretary Janet Yellen has warned that borrowing limits should be raised before the government runs out of cash. Failure to comply with State obligations may result in: Catastrophe Experts warn that it will hurt financial markets.Krugman is Called for the removal of the debt ceilingThe risk of a financial crisis has become a fiscal policy “conundrum” for Republicans.

read the original article business insider

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