Transcription
Well, in my book, I thought it would take 5 to 7 years. On the current track, we are I think Trump, as you said earlier, is an accelerant. You know, it's certainly not a sure thing. A lot of it goes around what are the underlying interest rates? If we go back to the zero interest rates, real interest rates of the 20 tens up through 2022 and the pandemic? Well, sure, that is a free lunch. I mean, you can spend and you basically don't have to pay anything. That's what all the I call them, anti-austerity ads who are absolutely convinced and some very smart people. You had them on your program followed us. I mean, there was Larry Summers secular stagnation. He's very nuanced about it, to be fair. Olivier Blanchard, president of the American Economic Association, said we shouldn't look at debt anymore. Paul Krugman, you know, wrote constantly about this. But what do you know? Interest rates have gone up. And the big question is, are have we normalized or is this just something after the pandemic? I think for many reasons. If you look at the history of real interest rates, they're probably about where they're going to be for a long time, in which case we are in trouble.
Okay. So that's that that's a long winded answer, but it's it's it's really about interest rates, not just about that. I want to get this out on interest rates. Paul's got eight questions. He wants to jump in here. But the answer, Ken Rogoff, is I'm auditing at ten with Jason Furman. So I did a fancy logarithmic 30 year bond. We get to the Ken Rogoff 6% 30 year bond. Paul late next year, like autumn of next year. Ken, do you still model a 6% yield for the United States of America? Well, I think a 6% ten year Treasury is more likely than a one in three quarters Treasury that we had for a long time. Absolutely. I mean, it's very hard to predict interest rates, but I think there is likely to go up as down.
Professor. I've been in this market since for 35 years, and we've been talking about the national debt and deficits every single year, yet nothing changes. And I guess I've been told by others that say, hey, as long as people continue to buy our Treasury bonds, we're okay. How do you think about that? The question is, at what price? We've gone through this period where interest rates have gone down and down and down and our debt, you know, has gone up from maybe 30% of GDP in 1980 to 60% to 90% to over 120%. And the interest rates have been coming down until they didn't. And if you look at history, there have been long periods where interest rates were rising, where they're in decline. And I think they're in a period where they're normalizing. So people were too focused on debt and not looking enough at, well, what's the interest on the debt? That's what's changed.
What do you what would you if you were sitting in Congress and you had a couple of folks on both sides of the aisle with you, what what would you suggest they do to address this issue? Well, why don't you at least give it a try to writing a 2 to 3% deficit instead of a six or 7% deficit. You know, while you organize, I mean, you know, the solutions are well known. You could improve the tax system. There are ways to make it more efficient. We don't have a very efficient system would be the understatement of the year. You know, there are there are all kinds of suggestions for improving growth. But I think sort of a sober thing to do would be to at least not run what we call a primary deficit means above and beyond the interest payments, which right now are about 3% of GDP.
I just want to drop in here with an important announcement separate from Ken Rogoff. And we're thrilled you're listening to us across the nation today and indeed around the world in a fractious United Kingdom. Angela Rayner resigns as U.S. deputy prime Minister. I'm not going to go into the nuances because I don't understand it, but there has been an uproar in the Labour Party wrapped around the Deputy Prime Minister. She resigns and also will resign various posts at the Labour Party as well. So that's breaking news in the United Kingdom. What perspective for you? As we can, we continue with Kenneth Rogoff. Why don't you pick it up with Professor Rogoff?
So, Ken, as we think about just kind of global economic growth here, and we've got we're now in a world of tariffs, reciprocal tariffs, all kinds of barriers going up the global trade. As you step back and look at it from a 30,000 foot level, what does that mean to you for for kind of global economic growth? Well, I think near-term, you know, the growth has held up better than anyone would have guessed with all this noise going on. That's been a surprise. Now, we may find you're getting the labor data today. And, you know, it wasn't as good as we thought it was. And it's hard to know what's going on. I might interject, you know, Labor Day, Jobs day, it's always been the big number because it's the most reliable number that we get sort of in real time Maybe now and going forward, it's not going to be considered as reliable. And I don't know what we're going to look at.