Justin Wolfers

Let me just explain the basic macroeconomics, the dynamics of it all.

So it's actually, here's the world we're currently in.

Everyone believes the US government can pay our debt, right?

So therefore they charge us low interest rates.

Because they're charging us low interest rates, we can make the monthly payments.

Not a problem.

What happens, though, if the world wakes up one day and is worried we can't pay our debt?

This is what happened to Greece.

Well, then they're going to jack up the interest rates.

Right.

When you owe a lot of money, if the interest rates go up, it becomes really hard to make your monthly payment, in which case we can't repay, in which case they jack up the interest rates, in which case we can't repay, in which case then we're shut out of global markets, which means we have no ability to borrow from the future.

Whether we here as the U.S.

government narrowly or whether that spreads to state and local governments and whether that spreads to American businesses depends on which crisis we get to have.

So I want you to notice, though, that there's sort of what economists call equilibria, which just means two things that could happen.

Everything's good because everything's good and because everything's good, everything keeps being good.

People worry that things are bad because things are bad, things become bad.

And if you keep your debt low, even if the rest of the world wakes up worried about you, they jack up the interest rates, you can still pay it.

Right.

The higher you get your debt, the bigger the problems that causes.

And so therefore, the more susceptible you are to this.