The U.S. Congress is turning its attention to something called the Build it Back Better (BBB) bill. This is a good time to think critically about the political economy of our national debt. It is good to start with some facts and acknowledge what we do and do not know about the economic consequences of a large public debt. A big part of this is discussion must be the question of how we tax ourselves to pay for this debt.
Public debts aren’t new, and the U.S. government has spent more than it has received in taxes for almost all of the past half century. Despite our economic cycles, we remain the largest rich economy, with reasonable long-term growth and currency that is the most dominant in world history. Clearly, a rich nation can run a debt for a long time without meaningful consequences.