So why should we worry about escalating debt? The answer, in a word: prudence.
We don’t know how much federal debt is too much. It could be “a lot more” or “not much more.” What we do know — from previous financial crises in many countries and at many times — is that once investors, traders and speculators lose confidence in a country’s debt, the economic, social and political consequences can be devastating. Interest rates may soar; inflation may surge; governments may raise taxes sharply and cut spending deeply.
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But once you cross that line, it’s hard to get back to the other side. The prudent thing to do is never to get close to the line. We aren’t being prudent.
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