Edward Conard

Top Ten New York Times Bestselling Author

  • “…a comprehensive explanation of the modern economy.” - Julian Robertson, Founder, Tiger Management
  • “…reminds us that inequality sends a signal of what society lacks most, in America’s case, entrepreneurship and risk taking.” - Lawrence Lindsey, CEO, The Lindsey Group, former Director of the National Economic Council
  • “…a comprehensive explanation of the modern economy.” - Julian Robertson, Founder, Tiger Management
  • “…a fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
  • “Unintended Consequences is full of substance, it is one of the must-read books of the year, and once I finish it I will be giving it a second read through right away.” - Tyler Cowen, Professor, George Mason University
  • “…a fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
  • “There are an amazing number of good ideas and interesting points made in Unintended Consequences. The thinking underlying it, and the obvious depth of understanding of the author, are very impressive.” - Steven Levitt, coauthor of Freakonomics; 2004 John Bates Clark Medal
  • “Unintended Consequences represents the most cogent and persuasive analysis of the Financial Crisis to date.” - Andrei Shleifer, 1999 John Bates Clark Medal Winner
  • “…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
  • “…reminds us that inequality sends a signal of what society lacks most, in America’s case, entrepreneurship and risk taking.” - Lawrence Lindsey, CEO, The Lindsey Group, former Director of the National Economic Council
  • “Unintended Consequences offers deep and well-argued analyses on almost every issue.” - The New York Times
  • “Unintended Consequences should be read by anyone who takes for granted the superiority of progressive taxation and has not thought carefully about the trade-offs involved.” - The New Republic
Upside of Inequality Oxford Unintended Consequences

AI Summary. National debt is considered sustainable when it grows more slowly than gross domestic product, so when the average interest rate on government debt (R) is below the economy's growth rate (G), debt can be sustainable even if non-interest spending exceeds revenue. R has been below G over the past 15 years.

Marc Goldwein Committee for a Responsible Federal Budget
Date Posted:
Is Database:
Database

Noting for the past 15 years R < G, @MarcGoldwein argues that in a world where R > G, at current debt stocks and primary deficits, the US will face a debt spiral.

How does the interest rate relative to growth determine debt sustainability?

Core argument: The average interest rate on U.S. government debt (R) has run below the average growth rate of the U.S. economy (G) for the last 15 years.

Debt Sustainability = When national debt grows slower than gross domestic product (GDP) or expected to stop growing before getting too high. Average interest rate on government debt (R) describes the growth of current debt, while G the average growth rate of U.S. economy represents its erosion (relative to GDP). When R<G, debt may be sustainable even when non-interest spending exceeds revenue. When R<G, one-time borrowing has little effect on long-term debt-to-GDP. For the last 15 years, R has been below G.

Takeaways by Macro Roundup® AI

  1. The average interest rate on U.S. government debt (R) has run below the average growth rate of the U.S. economy (G) for the last 15 years.
  2. When R is below G, national debt may be sustainable even when non-interest spending exceeds revenue.
  3. Debt is sustainable when it grows more slowly than GDP or is expected to stop growing before reaching too high a level, and with R below G one-time borrowing has little effect on long-term debt-to-GDP.

Related Articles:

  • When Does Federal Debt Reach Unsustainable Levels? — The authors estimate that U.S. debt held by the public cannot exceed roughly 200% of GDP even under favorable market conditions, and that under current policy the ratio reaches 175–200% within about 20 years. After that point, they argue, no tax increases or spending cuts could avert default or inflationary debt monetization.
  • Are High Interest Rates the New Normal? — The rise in interest rates reflects higher real interest rates rather than inflation expectations, since breakeven rates—the gap between yields on ordinary bonds and inflation-indexed bonds—indicate markets expect inflation to stay under control. Real rates well above 2%, up from below 1% before the pandemic, may prove transitory.
  • Living with High Public Debt — High public debt ratios are likely to persist because large sustained primary budget surpluses are politically unrealistic, real interest rates are already very low, faster global growth is hard to engineer, inflation is not a sustainable route to reducing debt, and financial repression is less feasible amid liberalized markets.
Showing 247 database articles primarily about Financial Markets