The national debt hasn’t been a major issue in the 2026 midterms. But perhaps it should be. As of last month, the United States is in debt to the tune of $40 trillion. That’s 12 zeros, which averages out to about $116,000 per American.
It’s enough that even economists like Jared Bernstein, the chair of the US Council of Economic Advisers under President Joe Biden, is starting to worry. Bernstein has long argued that the national debt is nothing to worry about too seriously as long as servicing it — that is, paying the interest on it — remains manageable.
Bernstein has since changed his tune. He told Today, Explained co-host Sean Rameswaram after last month’s debt milestone that while the number itself is “a big distraction,” two factors have him worried: Congress’s inaction and rising interest rates. But is it well and truly time to panic? Are we in a moment of no return?
Below is an excerpt of Sean’s conversation with Bernstein, edited for length and clarity. There’s much more in the full podcast, so listen to Today, Explained wherever you get podcasts, including Apple Podcasts, Pandora, and Spotify.
Have you now or ever been wrong about the national debt?
Yes. Who hasn’t?
Tell me what your position was and why you think it maybe was wrong.
A lot of the economic work on the national debt involves forecasting, predicting where things are going. And nobody can really forecast things like interest rates or when there’s going to be another recession or a war or a pandemic, so nobody could honestly answer that question with, “I’ve been right about everything.”
But I feel good in the sense of being intellectually honest about how I’ve thought about this. When the numbers were pointing to a level of calmness about our fiscal outlook, even though lots of people had their hair on fire, I didn’t go there. I was pretty adamant that there wasn’t anything to be overly worried about at this point, for reasons that we can get into.
When the numbers changed, and the outlook changed, and the politics changed, I changed.
Let’s start with why you thought it was okay to carry loads of debt in the first place, because that was your position for some time, right?
Correct. When you say loads of debt, the important thing is not just this load of debt or the stock of debt. Think of the debt as the water in the bathtub and think of the flow. Every year, you get a deficit or a surplus. That’s the water coming into the bathtub.
If you have a large stock of debt or loads of debt, as you say, which we were carrying, what you really want to look at is: What’s the rate of interest? How much debt service do you have to pay to your creditors on that stock of debt? And as long as the interest rate stays pretty low and the country’s ability to service its debt is manageable, there’s no obvious reason to break out a sweat, even if there’s a lot of water in the bathtub.
As long as you’re growing faster than your interest rate payments, as long as you’re not adding too much to the debt every year, underlying economic growth can allow you to service that debt without breaking a big economic sweat. And that’s where we were for a bunch of years. So that was the calm part.
Would you say you were part of an economic consensus in this country?
I would say yes, with an asterisk that maybe it was 50-50. Half of us who were watching it had hair that wasn’t burning up and the others had smoke coming out of their hats.
By the way, there’s an interesting strain here that we shouldn’t miss because it becomes more and more relevant over time. Of the hair-on-fire group, there were two classes. One was genuinely freaked out, incorrectly in my view, and the other was a bunch of politicians who pretended to have their hair on fire, but really didn’t.
“Don’t get hung up on the big, round number. It’s okay if your debt grows. It’s just not okay if your debt grows faster than your economy.”
These were — I used to call them chicken hawks. They were budget hawks, but they didn’t really want to do anything about it. And in fact, they consistently pushed in the wrong direction, which turned out to be kind of an important component of my apotheosis in this space.
Now, the big moment. Something happens at some point during this Trump administration that changes your mind. Tell us about it.
It wasn’t like at 2:37 pm on a particular day, just to be clear. I saw a number of things eroding and it wasn’t just during the Trump administration.
Something flipped in my head a little bit because any kind of what we call a reaction function by Congress, to react to these unsustainable forecasts, looked dead to me. And then I started seeing some academic work that actually measured this and showed, lo and behold, Congress was no longer reacting to the budget outlook. That was part one.
Part two is I started to see interest rates drift up. And if you’ll recall earlier, as I think you put it, interest rates found their way into the conversation.
[Part three], we saw budget deficits that in normal times — the budget deficit, which again, that’s the water flowing into the tub — should be negative 2 to 3 percent. They’re 4, 5, and 6 percent. That’s almost a recessionary-level deficit. So you put those three things together and my head broke.
Do you think this congressional inaction or indifference to the debt was somehow seeded by decades of economists like yourself, saying, “This is okay”?
Let me flip that on you, because I don’t want to hold myself or my colleagues unaccountable, but I actually think the other side may be even more to blame or equally to blame in the sense of, they were saying the economy is about to explode for 30 years. And it didn’t.
Now it is true that those of us — speaking for myself, I was saying, “We really ought to get our fiscal house in order, but we don’t need to worry about an immediate crisis. We have time to fix this.”
I was trying to be nuanced, but American politics doesn’t do nuance, so you can blame me for that.
Is the economy about to explode?
No. We still have time to fix this and the sooner we start, the better.
When I talk about debt unsustainability and the potential for a debt spiral, I’m talking about over the next decade. I’m not talking about next week. The good news, Sean, is that there are ways to start repairing the damage. We can’t fill up the hole, but we can stop digging the hole.
There are ways to stop digging the hole that are both good politics and good policy, and it has to do with reversing a bunch of tax cuts on the upper end of the income and wealth scale.
So what do we do? Do we just wait for a different administration?
That’s the answer for almost any good thing you want to do economically. I’m not saying this as a partisan: It’s very clear that this administration has caused all kinds of economic problems, but when you talk about the debt and deficit, I’ve tried to be pretty balanced in this conversation.
It’s not just the [Republicans]. They’ve definitely made the biggest contribution to the unsustainable path through their relentless tax-cutting. But there was a time when I was in the Obama administration that we basically made permanent 80 percent of the Bush tax cuts. Republicans have been the lead flank in taking us to this unsustainable place, but too often the Democrats have not reversed those measures and in fact have, in some cases, endorsed them.
And you seem to think that this is within reach, that we’re just a few steps away from making $40 trillion look more like $30 trillion or $20 trillion?
That’s an interesting question, because it’s probably making $40 trillion look more like $41 or $42 [trillion] rather than $44 or $45 trillion.
But again, Sean, don’t get hung up on the big, round number. It’s okay if your debt grows. It’s just not okay if your debt grows faster than your economy.
As long as the economy’s growing faster than the debt, which used to be the case, then that ratio’s going to come down. So it’s okay if the debt accumulates a little bit more. What’s not okay is if it just keeps spiraling and the growth rate decelerates.
So let’s keep it around $40 trillion. That’s the takeaway.
No, that’s not the takeaway. Sorry. I think $40 trillion is a big distraction. I’m not glad we’re there, but at least we’re talking about it.
I think the key thing is the debt ratio, the debt relative to the economy. I think we can get back on a path where debt to GDP doesn’t just keep growing in good times and bad. It stabilizes in good times, maybe even comes down a little bit in good times because the economy’s growing faster than the debt — the denominator’s growing faster than the numerator, if you will.
I think it’s plausible, but it would mean very different people, a very different composition of people in Congress and the White House.
My new takeaway is, “Keep the debt in check.”
Love it.
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