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Stephanie Kelton and Noah Smith

Just When Should We Start Worrying About Deficits?

The U.S. is racking up record debt. It feels great now, but someday the tab will come due.

Ok, yes, it’s a metaphor.

Ok, yes, it’s a metaphor.

Photographer: S. Vannini/De Agostini Editorial/Getty Images

The U.S. deficit is rising again, a lot. The Congressional Budget Office just said it expects the deficit to top $1 trillion in 2019. Some economists say that at some point, debt becomes a drag on growth. Is the U.S. approaching that threshold? Should we be worried? Bloomberg Opinion columnists Stephanie Kelton and Noah Smith met recently online to debate.

Stephanie Kelton: I don’t find the projections particularly interesting, nor do I find them disturbing — at least not in the “OMG trillion-dollar deficits are coming! Run for the caves!” sort of way. What I find interesting is not the budget forecast itself but the fact that Republicans added roughly $2 trillion in stimulus at a time when nearly everyone said it shouldn’t be done, citing proximity to full employment. “You don’t do stimulus at full employment," was basically the argument. Well, here we are well into the experiment and ... what’s the problem? Inflation remains in check, unemployment has ticked down a bit further, small business confidence is at a 45-year high and growth has accelerated. So that’s interesting.