Published Date Jan 21, 2021

FORTUNE: Do government deficits matter?

Does it matter? Old-time Cassandras, myself included, used to argue that big deficits would “crowd out” private investment, soak up savings, and push up interest rates. But today, interest rates are effectively zero—and financial markets seem to believe they will stay that way for decades. Government debt has passed the pull-your-hair-out benchmark of 100% of GDP, but low rates have kept debt service comfortably below 2% of GDP. As former Treasury Secretary Lawrence Summers told the Economic Club of New York yesterday, the government, if it wanted to, could lock in low interest rates for the foreseeable future with 30-year debt.

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By Brenna Moses

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