A U.S. debt crisis would trigger spikes in inflation and interest rates with devastating consequences for the macro economy. Investors would likely flee from U.S. Treasury and corporate debt, sending the economy into a deeper growth tailspin than experienced in the Great Recession. Historical evidence shows that countries successfully reducing debt levels typically require running primary surpluses and maintaining strong growth, often only achieved after political consensus is reached following a severe crisis. Experts caution that addressing these problems after a crisis becomes much more costly, affecting banking and pension systems with permanent negative effects on economic growth trajectory that will impact many generations.
Learn more about the launch of the Hoover Institution’s Fiscal Policy Initiative.
WATCH THE VIDEO
Featuring:
- Marc Goldwein, Committee for a Responsible Federal Budget
- Michael Boskin, Hoover Institution
- Paul Schmelzing, Boston College
