The Debt Distraction: When Experts Get It Wrong

The national debt has long been a contentious issue among economists and policymakers. In recent months, it has reached crisis levels – or so the narrative goes. Last month marked a milestone: the United States’ national debt surpassed $40 trillion. This staggering figure averages out to about $116,000 per American. Economists like Jared Bernstein, former chair of the US Council of Economic Advisers under President Joe Biden, have sounded the alarm.

Bernstein has been an advocate for downplaying concerns about the national debt as long as servicing it – paying the interest on it – remains manageable. However, with rising interest rates and congressional inaction, he has changed his stance. His concern is not unfounded; even experts can get it wrong.

The way Bernstein frames the issue is telling: “Don’t get hung up on the big, round number. It’s okay if your debt grows, but it’s just not okay if your debt grows faster than your economy.” This echoes a long-held assumption among economists that as long as interest rates stay low and the country can service its debt, there’s no need to panic. However, is this really a viable strategy?

In recent years, we’ve seen how this approach has played out. Economists like Bernstein were part of a consensus that dismissed concerns about the national debt. This dichotomy between those who were genuinely worried and those who pretended to be concerned for political gain is striking.

The problem lies in how we frame the issue. The focus has been on the numbers, rather than the underlying economic dynamics driving our debt. By examining the flow – or the deficit/surplus – rather than just the stock of debt, Bernstein’s argument holds some water. However, is this enough to justify the current levels of debt?

Bernstein’s own views have shifted over time. He admits that he was part of an economic consensus that downplayed the significance of national debt. His change of heart came with the realization that Congress has become increasingly indifferent to the budget outlook and interest rates are on the rise. The implications are clear: we’re facing a perfect storm of inaction, high interest rates, and unsustainable budget deficits.

This raises important questions about the role economists play in shaping policy. Have experts like Bernstein inadvertently created a culture of complacency around national debt? By consistently downplaying its significance, have they given policymakers an excuse to do nothing?

Now that even experts are sounding the alarm, what’s next? Will Congress finally take action on our ballooning debt? Or will we continue to kick the can down the road? As Bernstein’s story shows, getting it right is never easy – and sometimes, even experts get it wrong.

It’s time for a more nuanced conversation about national debt. We need to move beyond simplistic rhetoric and focus on the underlying economic realities driving our debt. Only then can we truly understand what this means for our economy, policymakers, and future.