Fiscal hawks have been sounding the alarm about rising debt levels for decades, but their nightmare scenario of runaway inflation hasn’t come to pass. How do we know if this time is different? In April, Reason’s Zach Weissmueller spoke with the Hoover Institution’s John Cochrane, an economist and self-proclaimed debt crisis “doomsayer.”
Q: At the end of World War II, the debt-to-GDP ratio was similar to today’s, the economy boomed, and we were able to slowly grow our way out of it. Is that a good analogy to the pandemic?
A: We borrowed a ton of money to save the world from fascism. Then we stopped spending money. The war was over. The U.S. after World War II ran steady primary surpluses—whereas right now we’re talking about at least 3 to 5 percent primary deficits forever, plus stimulus in every crisis, plus Social Security and Medicare.
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