AUDIE CORNISH, HOST:
The national debt surpassed $22 trillion this week - a new record - and this despite candidate Donald Trump's promise to reduce U.S. debt once he became president. There was a time when the soaring national debt caused panic in Washington. Now it's mostly crickets, at least from the officials who have control over the federal budget. So what's changed? We're going to ask Jason Furman. He was a top White House economist in the Obama administration. He's now at the Harvard Kennedy School.
Welcome to the program.
JASON FURMAN: Thanks for having me.
CORNISH: So you've written about the debt. And you hear that $22 trillion figure, and you argue that it's not so scary. How come?
FURMAN: I've been paying attention to fiscal policy, debts and deficits, for decades now. And we're at a point where something I never thought would happen has happened. We have a really high level of debt. But one of the main reasons you worry about debt is that it drives up interest rates, and interest rates today are really low. I think that's telling us that something's changed about the economy. And we need to change the way we think about debt and deficits along with that change in the economy.
CORNISH: To you, what has changed? What's different?
FURMAN: What deficits are is a drain on savings. But right now, there's a lot of savings coming from all over the world. Businesses aren't investing as much as they used to because a lot more businesses are digital. And as a result, interest rates are a lot lower, and the problems that deficits cause for interest rates are much less serious than they were a couple decades ago.
CORNISH: But as you're talking about, I mean, the economy is good. Unemployment is low. If there was ever a time when we should be shrinking the national deficit, shouldn't this be it? I mean, is this the time for some dramatic moves?
FURMAN: Yeah. Look. I don't think there's a very big economic cost in deficit. That being said, to use money in a wasteful manner that doesn't help is a mistake, as well. It's much better to be reducing the deficit or preparing for the future than something like the tax cuts, which I didn't think were a particularly well-designed way to help the economy.
CORNISH: Right. The Trump administration argued it would generate enough economic growth to offset revenue lost over the next decade. The new tax law has been in effect for a little over a year now. Are we actually moving in that direction?
FURMAN: No, not at all. We did get extra economic growth in 2018. Most economists think that was a temporary fiscal stimulus and that we're not going to continue to get more growth in the future. But what's notable is even with that extra growth, the deficit went up a lot. And it is in a place right now that we've never seen in peacetime. Absent a large recession, we haven't seen deficits like that. So we are in an unprecedented place.
You know, what I advocate is that we at least, for now, have a principle of do no harm. You know, we don't need to panic. We don't need to go into a massive fiscal negotiation to dramatically cut the debt. But we shouldn't do the opposite either. We shouldn't be piling on more and more and making the situation even worse.
CORNISH: If the national debt is an indicator of long-term economic health, then why wouldn't we be worried?
FURMAN: I think the most important indicator of our economic health is our economy. You know, how much is our GDP growing? How many of our people are employed? Do people have health insurance? And so if part of why we had debt was because we were dealing effectively with those issues, it wouldn't concern me very much. I am concerned that we are adding to our debt in ways that isn't helping those other problems. But I think you want to keep your eyes on the goal of fiscal policy, which is really to solve our problems, not, you know, green eyeshades.
CORNISH: Jason Furman chaired the Council of Economic Advisers under President Obama. He now teaches economics at Harvard's Kennedy School.
Thank you for speaking with us.
FURMAN: Thanks so much for having me.
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