哈佛教授罗格夫：美国债务危机需危机催化改革

Bloomberg Audio Studios.

This is my conversation of this Jackson Hole without question as Professor Rogoff will be speaking to the assembled at lunch here uh in about an hour. Of course, the book last year is a required read. Brammo's son actually even read the book Moving Royalties Up Your Problem. And the new edition of Our Dollar is there's a Rogoff wedding coming up here as well. Is it our dollar your problem? How are you and Mrs. Rogoff holding up?

We're holding up so far. It's just a week away. Our daughter's getting married, but uh trying to control the budget just like the US government.

We're trying to control the budget. Let's do that right now. Uh here at Jackson Hall, Ken, I think what's so important here is there was another time and place. You have an oped in the FT from a couple years ago. Here's the photo, folks. Uh Bill Clinton, Al Gore. There was a time where this is a a photo right from Ken Rogoff's op-ed. How did we screw this up? How did we get to the will of 1999 to the irresponsibility of 2026?

Super short answer. We've had a couple catastrophes, the global financial crisis and the pandemic. But I think a larger issue which has been a big topic at this symposium for years and years was a near religious conviction among academic economists in the journals that interest rates were going to go down and down and down. So who cares how much debt you owe? You'll never have to pay interest on it. And I think that's dominated the political landscape. the interest rates have reversed but Washington hasn't and a lot of academics hasn't.

The Besset angle and in your Project Syndicate essay in the last 72 hours I'll say you go right after uh Secretary Besson Glenn Hubard at Colombia has a respect for the idea you can do supply side but you may not grow with it. There's a certitude that we will grow our way out of this predicament with a a pseudo supply side exercise. Is there any evidence we can do that? Well, we might, but let's start with the fact we're infinitely rich at the moment.

Even if we grew really slowly, we ought to be able to pay our bills. So, telling us we're going to get much richer in the future, that will bring in some further tax revenues, but demands on expenditures, old age expenditures.

And then there are a lot of technical issues around that. Interest rates will probably go up if there's fast growth. uh labor shares falling. That's all over the place. Capital's harder to tax than labor. So I I think but there are many other reasons. Interest rates are going up. How about the war in Iran? How about populism? Not just in the US, all over the world.

Have you been asked to be on a task force?

No. Uh I I wasn't.

You got those shorts.

No, I I I think the world of Kevin Worsh, but I'm just as grateful that I'm not on one of the tasks.

Oh, that was so smooth. Folks, did you see how Ken Rogov did that? Ken, let let's talk seriously. We had Jack Lou on Bloomberg money is about retirement, social security, and all that. And the former Treasury Secretary said day one after the presidential election, we need a panel. We need to get something done about Social Security. You've got to be a natural selection for that panel. What's the first task to get our entitlement program straightened around?

Honestly, I think it's going to be very difficult to do till we have a crisis that convinces voters something has to happen. They're not convinced. Uh now, some economists are finally coming around to the view that maybe it wasn't the free lunch they said it was, that maybe someday we'll get inflation, financial repression, but it's not the dominant political position. I think if you try to run in 2028 on I'm gonna fix social security in any more than a passing phrase

silence in the rooms.

Yeah. That people's eyes glaze over. I think it's going to take that's why my book predict at the end of it predicts you know at some point this will end in a crisis of some sort to catalyze the change which will be painful.

Ken the rain here is killing my glasses. I'm fogging up like uh like no tomorrow. We're going to fog up with higher yields. You've nailed the vector towards higher yields. What 10-year yield or even 30-year bond do you perceive to be that point of crisis for the American public?

Well, I mean, it's the debt level, the level we're at already is difficult. The crisis comes when a shock happens and you're not resilient. The Iran war was a mini shock really compared to what could happen. But over the next 5 years, it could be a,

you know, cyber war. It could be, you know, some kind of artificial intelligence thing, most likely China and Taiwan, but a a war kind of shock. That's the scenario that pushes up interest rates, right?

And that makes it hard to The Fed can't just cut interest rates if the market's pushing them up. The government can't just print money if the market's pushing them up. And I I think in our environment, that's a big risk.

The charm of this time is different. Reinhardt and Rogoff is you combine you conflate together responsibly public and private investment. So right now if we conflate together 40 trillion plus private this private that with Wall Street's new addiction private equity and private credit are we doing a this time is different path right now?

Well look I mean of course there's going to be some kind of spectacular collapse in AI at some point which doesn't mean you should take your money out of AI. Schiller and Greenspan famously predicted the collapse of the stock market when I was at around 4,000 then it went to 8,000 and they were right and then it went to 6,000. It collapsed but timing was terrible and I think that's difficult but the US government uh needs to take steps.

Uh there'll be much smaller and easier steps if you do it sooner. I don't see any signs of that happening.

You and I grew up under the shadow of Barbara Bconibel. He's the one folks that told Nixon here's the door. What's your hurry? There used to be a normal process here of say Barbara Connible House Ways and Means. Where does Congress fit in to the crisis that you see coming?

Well, you know, at the moment they're kind of sidelined and paralyzed, but there are many people in Congress on both sides of the aisle who are aware of this.

But again, you know, it's hard to catalyze action. By the way, we're talking about the United States. We could go to the UK. We could go to France. Look what happened to Macron when he tried to raise and

the French elections coming up right now.

They're going to get murdered, you know. And so, uh, it's the same thing all over the world.

Jason from Cambridge emails in and says, "Tom, you trashed me with act 10 to Ken Rogoff. The question of the, uh, the afternoon here, Scarlet, is there great inflation at Harvard economics?"

Well, we have a new policy coming in place to try to deal with it. Uh, but, you know, absolutely there was. I will say when I came to Harvard, I learned from complaints from the dean that I was one of the easiest graders. I didn't change a thing. And then over 20 years, I find out from some of the kids, you're the hardest grader at Harvard. So that tells you

I've been told you're ruthless. I mean,

I'm not trying to be. I'm trying to be fair and, you know, reasonably

brutal and ruthless. Ken Rogov, thank you so