The Hill recently published an op-ed arguing that America’s ballooning national debt is not a problem and asserting that default is impossible, interest rates are policy-driven, and foreign lending is irrelevant. Though superficially reassuring, this perspective dangerously underestimates the real economic costs of fiscal irresponsibility and risks misleading the public into complacency.
1. Default Isn’t Just Technical — It’s Real
First, the op-ed wrongly argues that the U.S. can never default because it issues its own currency.
While technically true in a narrow sense, this assertion ignores the real-world consequences of relying on money creation to service debt.
Printing money to pay bills may avoid formal default, but it does not eliminate risk. It risks inflation (a form of partial default on obligations to bondholders), erodes confidence in the dollar, and undermines the purchasing power of savers and wage earners. Argentina and Zimbabwe also issued debt in their own currency, but inflation, not insolvency, was their undoing.
As Federal Reserve economists have long emphasized, fiscal dominance — where monetary policy is subordinated to the needs of fiscal financing — can lead to serious macroeconomic instability.
2. Crowding Out Is Not a Myth
Second, the piece dismisses the idea that government borrowing crowds out private investment and instead claims that deficits create private sector savings.
This is a fundamental misreading of both economic theory and empirical evidence.
Studies by the Congressional Budget Office and others consistently find that government deficits do raise interest rates which reduces private capital formation. In fact, for every dollar added to the deficit, private investment typically falls by about 33 cents, depending on economic conditions. The assertion that government deficits simply create new savings ignores the ignores the fact that government borrowing competes with private borrowers for limited funds in real-world capital markets.
3. The Fed Doesn’t Control Long-Term Yields with Rate Changes
Third, the op-ed argues that the Fed could simply cut rates to lower government interest costs.
This is incorrect.
While the Fed sets short-term policy rates, it does not fully control long-term yields, which reflect expectations about inflation, future growth dynamics, and fiscal sustainability.
First, the op-ed overlooks the inflationary consequences and the Fed's dual mandate to maintain price stability. A central bank that suppresses rates to accommodate fiscal expansion risks losing credibility — a lesson learned throughout history.
Second, the argument that the Fed can effectively control longer term yields simply isn’t supported by the evidence. A regression of 3-month, 1-year, and 10-year yields against the Federal Funds Rate over the past 12 months reveals that
the Fed influences only the shortest term (3-months),
the impact on 1-year yields is statistically insignificant, and
the relationship with 10-year yields is negative.
4. Foreign Creditors Still Matter
Finally, the op-ed’s claim that foreign buyers, such as China, are irrelevant to U.S. financing is deeply misguided.
While it is true that the U.S. can finance deficits domestically, reduced foreign demand for Treasuries would require greater reliance on domestic capital, thereby raising borrowing costs and potentially leading to a weaker dollar.
The global demand for Treasuries reflects confidence in U.S. fiscal and monetary discipline. That confidence should not be taken for granted.
5. “Just Print the Money” Is Not a Strategy
The authors suggest that domestic buyers will absorb the excess supply of Treasuries.
But what if they don’t? What if households, banks, and institutional investors lack the appetite — or balance sheet capacity — for $116 trillion in projected federal debt over the next 30 years?
The authors’ answer is that the Federal Reserve can act as a buyer of last resort. In other words, if the market won’t buy the debt, we’ll just print the money.
Problem solved — à la Weimar Republic.
6. These Arguments Aren’t New — and They’ve Been Wrong Before
Importantly, these misguided economic arguments about debt sustainability are not new.
Fifty years ago, an economist writing in the Journal of Political Economy argued that "the government can create debt and yet never have to levy a future tax to repay the debt or to pay interest on the debt. Instead the government merely issues new debt with which to pay the interest." Again, thirty years ago, an NBER paper argued that deficits could be sustained indefinitely since growth was likely to outpace interest rates. The authors predicted only a 12–13% chance that the debt-to-GDP ratio would reach 100% within 50 years and just a 5–8% chance it would hit 150% within a century.
Whoops.
In the 2010s, economists like Olivier Blanchard, Lawrence Summers, and Jason Furman revived similar arguments under new packaging. To their credit, some, like Furman, have since reversed course and now publicly acknowledge that rising debt levels pose a serious threat to economic stability. But the repeated reappearance of these same arguments, no matter how many times reality proves them wrong, demonstrates the allure of easy answers and the political convenience of resisting fiscal discipline.
Public debt is now 100% of GDP, and interest costs are the fastest-growing part of the federal budget. Even if the U.S. cannot technically default, that does not make the debt benign. A nation that chooses to inflate its way out of debt is still defaulting in real terms. Pretending that debt doesn’t matter simply because we have a printing press is not economic wisdom — it’s magical thinking.
7. It’s Time for a Serious Conversation
We should reject the complacency offered by economists who advise us to stop worrying about the debt, and take seriously the warnings from credit rating agencies, bond markets, and historical precedent.
High debt levels
reduce economic flexibility,
increase vulnerability to shocks,
push the burden of taxation into the future, and
threaten long-term prosperity.
A serious conversation about fiscal responsibility is not fearmongering — it’s the beginning of a solution.