The debt ceiling debate is more about politics than economics

The debt ceiling debate is full of contradictions. It’s real but it’s not real. It’s a problem but it’s not a problem.

The federal borrowing limit has been suspended since 2019, following the longest-ever government shutdown. Congress missed the deadline to raise the limit before it went back into effect over the weekend. Treasury Secretary Janet Yellen has moved some money around as a short-term fix, but Congress needs to raise the limit, and soon.

So now we’re back in an all-to-familiar game of political brinkmanship, where both parties try to get what they want under the threat of shutdown or default. The national debt, by the way, is about $28 trillion, and the Congressional Budget Office expects it to grow to $35 trillion by 2031. But the fight over the debt is more political than economic.

“A lot of it is not a magic number, but more sort of how investors feel about the government’s credit worthiness, how likely it is that they’ll be paid back,” said economist Megan Greene, a senior fellow at Harvard’s Kennedy School. “There could be a point at which investors decide no way are we lending to the U.S. government. But I think we’re a really long way off from that.”

On today’s show, Greene walks us through how America’s national debt is not only different from household debt, but different from other countries’ national debt, too. We’ll also talk about how thinking around the debt has shifted among wonks and politicians, and the degree to which the debt and the debt ceiling “matters.”

Later in the show, we’ll talk about “spiritual opium” and pick apart the infrastructure bill. Plus we get a fishy answer to the Make Me Smart question from John Hanke, CEO of Pokémon Go maker Niantic.

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Here’s everything we talked about today:

• “Debt Ceiling Deadline: What It Means and How Congress Can Act” from The Wall Street Journal
• “U.S. deficit to hit $3 trillion in 2021, then fade as stimulus relief expires, CBO says” from The Washington Post
• “Yellen Warns Congress About Failure to Act on Debt Limit” from The New York Times
• “Tencent Sinks After China Denounces Online Gaming” from The Wall Street Journal
• “Crypto ‘Wild West’ requires new laws, SEC chair says” from Politico
• “The infrastructure deal could create pipelines for captured CO2” from The Verge
• “Drunk-Driver Detectors for Cars Part of Infrastructure Bill” from Bloomberg
• “Industry groups, equity advocates laud infrastructure broadband provisions” from Roll Call
• “Augmented reality may change how we see the world. Until then, we have Pokémon.” from “Marketplace Tech”

Read the transcript here.

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