The U.S. national debt has been a topic of concern for many, with the current debt standing at over $34 trillion. However, Nobel laureate Paul Krugman argues that there is no need to be alarmed by this figure and that the debt can be stabilized through various means without causing a crisis.
Historically, countries have faced debt crises when they borrowed in another country's currency and were unable to pay it back due to liquidity issues. However, in the case of the U.S., most of its debt is owed domestically and is denominated in its own currency.
Krugman points out that debt as a percentage of GDP for the U.S. is roughly similar to levels seen at the end of World War II and lower than Japan's current debt burden or Britain's post-war level, neither of which triggered a debt crisis.
To stabilize the debt, Krugman suggests that taxes could be increased or spending could be cut by 2.1% of GDP. He argues that this is not a large number and would not significantly impact economic growth.
Political dysfunction, particularly the radicalization of the Republican Party in Congress, has been identified as a major obstacle to addressing debt concerns. Republicans have pushed for tax cuts and blocked efforts to collect taxes owed under current law.
Despite concerns about the national debt, Krugman argues that it should not be the primary focus for those concerned about economic policy. Instead, attention should be paid to political dysfunction and efforts to address it in order to create a more stable economic environment.
