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The Economic Perspective: “What’s the Cost of Public Borrowing?”

Mary: This is Mary Walden with economist MW, welcoming you to the economic
perspective. Today’s program asks, what’s the cost of public borrowing. Mike, the
national debt has risen by trillions of dollars as a result of the borrowing to fight the
Covid-19 pandemic. Although the financial help has been needed, many now worry about
the ability of the country to pay this increased debt. Is this a problem?
Mike: Summary Answer
a. Importantly, the answer to that question depends on what the best measure
of the cost of the debt
b. Typical measure used is size of debt relative to size of the economy
c. Now has risen to over 100 percent – ten years ago it was 60 percent
d. But many economists say a better measure is annual payments on the debt
as a percent of the economy
e. Due to falling interest rates, this measure is not higher than a decade ago
f. Implies can easily carry the higher debt
g. So key – watch the level of interest rates
h. I’m MW
Mary: And I’m Mary Walden for the Economic Perspective, an NC State Extension
program from the Department of Agricultural and Resource Economics.