Even if the U.S. avoids some of the worst-case scenarios, ballooning debt and the cost of servicing it could eventually slow economic growth and make the burden unsustainable, according to a former International Monetary Fund official.
Debt held by the public, or the amount the U.S. owes to outside lenders after borrowing on financial markets, is already at about 100% of GDP, and forecasts from the Congressional Budget Office show that ratio will climb to 116% in 2034, 139% in 2044, and 166% in 2054.
While those levels look alarming, Japan’s enormous debt demonstrates that an advanced economy that borrows in its own currency—like the U.S.—can manage its red ink, wrote Barry Eichengreen, who previously served as a senior policy adviser at the IMF and is now a professor of economics and political science at UC Berkeley.
While the U.S. enjoys the advantages of dollar dominance, deep financial markets, and Federal Reserve…
