Tags: Joseph | Stiglitz | debt

Stiglitz: Don't Worry About Record High U.S. Debt

Wednesday, 24 Feb 2010 02:56 PM

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Not to worry that U.S. debt has reached unprecedented levels, says Nobel Prize-winning economist Joseph Stiglitz.

"The United States has absolutely no real problem servicing the debt at the current level,” Stiglitz says.

“We should remember that what got us into the trouble we’re in, is that the financial markets were excessively short-sighted,” Stiglitz says. “They were focusing on the here and now, and not on the long run,” he tells Tech Ticker.

“The point I would emphasize is, that if we spend money in ways that yield even a moderate return — investments in education, technology, infrastructure — then in fact the long-run national debt will be lower.”

Spending more money today stimulates the economy and provides more tax revenue, Stiglitz contends. “By investing, we get higher growth over the long run,” he says. “All we need is a return of five or six percent on those investments, and the evidence is overwhelming that historically, we’ve gotten a much higher return.”

Stiglitz says he hopes that the bipartisan panel President Barack Obama is establishing to tackle the debt problem will refrain from “excessive short-sighted" behavior.

“We have to be careful not to fall into the same trap,” he says.

Mainland China's holdings fell to $755.4 billion at the end of December from a peak of $801.5 billion in May. The country also shifted into longer-dated Treasuries, The Wall Street Journal reports.

Japan is, on paper, again the largest foreign holder of U.S. government debt.




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