Does America have too much debt?
America has had debt since its founding! The government borrowed over $75 million during the American Revolution. Note: For those interested in an excellent explanation of the national debt, click here.
In his recent article in the New York Times, Paul Krugman asks the question, “Does America have too much debt?” He notes that there have been two major increases in the debt since the budget surplus of 2001. One was during the Great Recession (2007-2010), and the other was during Covid. In each situation, the spending packages that were passed by Congress were justified by the economic events; Krugman states that avoiding borrowing related to funding the Obama Recovery Act of 2009 and the American Rescue Plan of 2021 would have done more harm than good. While fiscal austerity during those times would have indeed created less debt, the costs would have been high. In 2009, the deficit surge helped prop up the economy and avoid a depression. During Covid, the spending of trillions in aid to families, businesses, the unemployed and state and local governments resulted in a fast economic recovery, albeit with inflation which seems to be easing.
He further writes, “Did we borrow too much money? Probably not. During those two economic crises of Covid and the Great Recession, adding to the debt was more than justified. I just wish some of the other borrowing had been used for better purposes: ending child poverty rather than giving tax breaks to corporations, rebuilding infrastructure rather than invading Iraq. But while our priorities were sometimes foolish, our borrowing wasn’t.”
Check out the Increase in the Debt Ceiling/Federal Debt since 1980!
Recent increases during the last administration are particularly notable.
Graph Source: Office of Management and Budget; Treasury Department; Washington Post