Krugman: Borrowing Money Has ‘Negligible Effect’ on the Budget and National Debt

EXCERPT:

KRUGMAN: "So the first point is, as you just said, we’re able to borrow money at extremely low interest rates. So if you ask, what is the future burden on the budget that will be created by the borrowing we’re doing now, the answer is it will be negligible. It'll be a rounding error in the budget. It’s just not going to matter. So the headline debt number will be gigantic. Of course, all numbers will probably be gigantic, but even as a percentage of GDP, we’ll end up, very shortly, with debt that’s higher as a ratio of GDP than at the end of World War II. But everything we’ve seen says that advanced countries that borrow in their own currency, like the United States or Japan or Britain, are able to carry, really, very high debt loads without crisis. And a lot of that is because interest rates — even when interest rates aren’t as low as they are now, interest rates are consistently below the growth rate of the economy, which actually means debt tends to melt away over time relative to GDP, as long as you aren’t massively irresponsible year after year.”