That's total nonsense. Of course high debt matters. A lot. Per Google AI:
How high national debt hurts America
High national debt, particularly when it grows unsustainably relative to the nation's economic output (Debt-to-GDP ratio), poses several threats to the American economy and its citizens.
Here's how:
- Slower Economic Growth: High debt can "crowd out" private investment. When the government borrows heavily, it competes with businesses for available capital, driving up interest rates and reducing funds for private sector investment, states the Peter G. Peterson Foundation. Less private investment hinders innovation, job creation, and overall economic growth. Research by the Mercatus Center indicates that each percentage point increase in the public debt ratio reduces economic growth by 1.34 basis points.
- Higher Interest Rates: Increased federal borrowing can lead to higher interest rates for both the government and individuals, says the Federal Reserve Bank of Dallas. This means higher costs for mortgages, car loans, and credit card debt, impacting household finances. It also increases the government's interest payments, potentially crowding out other priorities like investments in infrastructure or education.
- Inflationary Pressures: High debt and deficits can contribute to inflation, eroding the purchasing power of citizens and increasing the cost of living, notes the House Budget Committee. Printing money to finance debt obligations can also lead to inflation and currency depreciation. The Budget Lab at Yale reports that a permanent increase of 1% of GDP in the primary deficit raises inflationary pressure after 5 years, equivalent to a loss in household purchasing power of $300-1,250 per household in 2024.
- Reduced Fiscal Flexibility: High debt limits the government's ability to respond effectively to unforeseen events like economic downturns, natural disasters, or national security threats, according to the Committee for a Responsible Federal Budget. A significant portion of the budget becomes tied up in interest payments, leaving fewer resources for other priorities.
- Intergenerational Equity Concerns: Present generations benefit from increased government spending funded by debt, but future generations bear the burden of repayment, says www.mjeconomics.com. This can result in future generations facing higher taxes, reduced public services, and lower living standards than they would otherwise have.
- Risk of Fiscal Crisis: Persistent high debt levels can erode investor confidence in the government's ability to manage its finances, according to the Congressional Budget Office (CBO). This could lead to a sharp rise in interest rates, inflation, currency devaluation, and potential instability in the financial system.
