The far more difficult issue is whether or not this debt is being accumulated responsibly, and will result in a positive return in the future.
This is where JPMorgan boss Dimon gets concerned: in a slowing economy, can the government expect to see an uptick in output to offset the investment?
“Instead of focusing on the level of debt, we should be asking: What is the return on the investment?” Professor Veldkamp added. “If the government is issuing debt to invest in high-return projects, then debt is good. If it is not, then the debt will be tough to pay off because of low future productivity.”
The first-pass answer to whether Washington borrows wisely is “No.” The second pass answer is “Hell no.”