Wang: What’s there to worry about?
Sarin: Like, “Trillions of dollars here, trillions of dollars here, who really cares? And can’t we just print more money?” And there’s those funny memes I’m sure you’ve seen, like, “Money printer go brr.” So that’s this genre of argument.
And I’ve never been that sympathetic with this genre of argument, in part because we know that there are really substantial costs for the economy associated with running really large deficits. One of the costs is that it turns out that you spend a lot of your dollars on servicing your existing debt. What’s also true, when you’re running really high deficits, is that you’re in a situation where that type of expenditure leads to higher interest rates. Because it means that there’s more debt outstanding for the U.S. government, so our borrowers are going to say: Well, I’m going to charge you more, maybe because I’m less certain that you’re going to pay me back, or just maybe because the existing amount of debt that we have outstanding is quite significant.
And that means higher interest rates, not just for the U.S. government, but also for all of us as we’re looking to buy houses or buy cars. So I worry that these costs are pretty significant, and that’s even outside of the idea that we get into some sort of crisis, where we’re dragging down our economy’s capacity as a result of the checks that we’ve already paid out and that we’re having trouble financing.
We started this conversation with the question of: Where are we in the United States vis-à-vis other countries, and potentially vis-à-vis our own economic decline? You are a China expert who’s spent the last few weeks actually in the country. And I’m curious, having been there, having spent time there, what’s the view on the ground? And particularly, how competitive does it feel like to you vis-à-vis the United States?
Wang: Maybe the United States is not facing a Roman-style decline, but the Chinese have their own form of decline. So it’s my first time back, essentially, in three years. I used to live, for six years, in China between Hong Kong, Beijing and Shanghai. And what I was really struck by, being in China right now, is how wonderful and livable a lot of the cities are.