Economic experts in the US are divided in their assessments of the potential implications of the United States’ record-high national debt.
The United States witnessed on Monday its gross national debt surpassing the milestone of $33 trillion for the first time in its history, serving as a clear indicator of the nation’s shaky financial situation.
Sputnik talked to expert economists about their opinions regarding the record $33 trillion national debt and the approaches to address this situation.
Dimitri Papadimitriou, who serves as the president of the Levy Economics Institute at Bard College, expressed optimism about the United States’ outlook when asked whether the United States might find itself in a scenario where it needs to issue additional debt to cover interest payments on its existing debt, which potentially lead to more inflation and higher interest rates.
“In my view, the US does not need to worry about its national debt, irrespective of the amount. The US debt is issued in dollars, which, as the sovereign currency, is not limited in its amount, including the interest costs. There is no danger of a vicious circle,” Papadimitriou said.
Drawing from the Modern Money Theory (MMT), a macroeconomic framework that challenges conventional beliefs about debt and inflation, Papadimitriou further explained that inflation occurs only when a government directs its funds toward unproductive and unnecessary endeavors.
“The recent inflationary pressures [on energy and food] are due to exogenous factors, i.e., the Russian-Ukrainian conflict, and continuing supply chain disruptions from both the war and the COVID-19 pandemic,” Papadimitriou added.
Regarding the potential for reducing debt, the economist suggested that the United States has the option to decrease its debt by increasing taxes. According to the economist, this approach could also help alleviate inflation if it is triggered by excessive corporate profits.
Source: Almayadeen