Economist John Cochrane Is Still Worried About the Debt.

• Author: Weissmueller, Zach
• Position: Q&A

THE U.S. NATIONAL debt held by the public is currently almost $22 trillion, or about $57,000 per citizen, surpassing the country's annual GDP for the first time since World War II. The Congressional Budget Office predicted in March that the U.S. debt would grow to 102 percent of GDP by the end of 2021, to 107 percent by 2031, and to 202 percent by 2051. Those estimates came before President Joe Biden signed the $1.9 trillion COVID-19 relief bill, which made the long-term budget outlook even worse.

Fiscal hawks have been sounding the alarm about rising debt levels for decades, but their nightmare scenario of runaway inflation hasn't come to pass. How do we know if this time is different? In April, Reason's Zach Weissmueller spoke with the Hoover Institution's John Cochrane, an economist and self-proclaimed debt crisis "doomsayer."

Q: At the end of World War II, the debt-to-GDP ratio was similar to today's, the economy boomed, and we were able to slowly grow our way out of it. Is that a good analogy to the pandemic?

A: We borrowed a ton of money to save the world from fascism. Then we stopped spending money. The war was over. The U.S. after World War II ran steady primary surpluses-whereas right now we're talking about at least 3 to 5 percent primary deficits forever, plus stimulus in every crisis, plus Social Security and Medicare.

After World War II, we had stronger GDP growth than ever seen in history, driven by productivity growth in a very deregulated, innovative economy. What we're talking about now is starting at 100 percent debt to GDP, and then the big borrowing starts and continues forever in a very slow-growing, very regulated, high-tax economy.

Q: Some economists say low interest rates are the new normal, and so we shouldn't worry about government borrowing.

A: The size of borrowing we're forecasting makes this low interest rate argument completely irrelevant. The low interest rate argument says, "If we borrow a bunch and then sfop borrowing any more, we can roll over the debt at a low interest rate, and over 50 to 100 years, the debt-to-GDP ratio will slowly come back."

We have 5 percent of GDP that we're borrowing on...