有鉴于美国当前面临着战后历史上最大的债务和赤字,而且短期内没有缓解迹象,新任总统乔•拜登通过数万亿美元新债重振经济的计划看起来似乎十分鲁莽。然而,一个由新政府内外民主党经济师兼官员组成的知名智囊团则认为该计划不失为一个良策。其理论在于,美国已经进入了一个全新的范式时代:利率将在很长一段时间内保持低位运行。因此,堆积如山的新债务也不会带来什么威胁。
危险在于:利率的前景确实发生了重大变化,然而我们无法知道这一下行趋势将持续多长时间。简而言之,拜登的方案已经成为了美国经济政策史上最大胆的赌注之一。如果困难时期再一次降临美国,那么巨额的债务和赤字所引发的结果可能会与这些智囊的预测恰好相反,因为对美国国债的抛售将导致利率飙升,继而让美国陷入大萧条,而唯一的出路就是调高不利于增长的税收。保守派智囊团胡佛研究所(Hoover Institution)的约翰•科克兰说:“始终靠巨额赤字来维持运转是不现实的。低息这种手段有其作用,但无法为此买单。此举可能会推高利率。以‘刺激’之名而肆意借贷的数万亿美元新债将进一步推高所有债务的利息,继而导致出现我所称的‘噩梦场景’。”
在美国总统大选结束三周之后,两位最有威望的民主党经济师发布了一篇工作论文,为拜登用于基础设施、教育、家庭援助以及各城市、州援助的新开支洪流计划提供了专家佐证。在其研究《在低利率时代对财政政策的重新思考》(A Reconsideration of Fiscal Policy in the Era of Low Interest Rates)中,美国财政部前部长拉里•萨莫斯和美国前总统贝拉克•奥巴马的首席经济顾问詹森•弗曼认为,美国需要对财政政策发起“一场革命而不是改进”。在他们看来,此举十分必要而且在美国的可承受范围之内,因为他们认为美国当前的超低利率新环境还会持续10年或更长的时间。
拜登政府的财政部部长珍妮特•耶伦似乎也有着同样的观点。耶伦在今年1月举行的美国经济协会(American Economic Association)一项活动中称,即便债务大幅上升,美国的利息负担依然在承受范围之内。因此在她看来,如果出现新一轮的经济放缓,政府可以推出更多的刺激方案。
萨莫斯和弗曼指出,人们预计利率在当前环境下可能会上扬,因为他们会顺理成章地认为,当前居高不下的赤字和债务会让投资者感到担忧,而且对企业和资本收益税的削减固然会提升投资的利润,但也会引发资本的激烈竞争,从而推高企业和政府债券的收益率,而且这个背道而驰的现象正在发生。新发行的10年期国债如今的收益率约为1%,要远低于当前的通胀水平,这意味着我们已经迈入了一个“实际利率”为负值的时代。这两位作家称,市场预计这一现象会持续很长一段时间,并指出10年期通胀保值债券的收益率也处于负值区间,反映了国债收益率至少在未来十年内将落后于通胀的投资者预期。
是什么导致利率在超低位运行,为什么人们坚信这一利率会在未来持续很长时间?萨莫斯和弗曼称,美国企业已经学会更加高效地使用资产,他们提到了职场人士会经常在家办公,而且即便在办公室办公,其所用的空间也在缩减;他们还提到了爱彼迎(Airbnb)和特斯拉(Tesla)如何赋予汽车和房屋更多的用途。股东希望公司通过回购返还更多的利润,而不是将钱投入工厂,这类要求可能会减少资本支出。制造IT设备的科技公司已经大幅降低了其成本,削减了自身在新计算机和路由器方面所需的资金支出。另一个因素是人口结构:由于美国人的寿命更长,他们在职场时会将更多的收入用于投资,因此“储蓄的供大于求”将让资本池充盈起来,而这些资本能够助力各大公司的发展,并保持借贷成本的低位运行。
他们认为,利率已经是相当之低了,而且不会有太大的波动,正因为如此,美联储(Federal Reserve)已经没有空间通过低息货币来推动经济发展。他们说,美联储“当前在加速经济增长方面做的都是无用功。”国家需要将这一任务交给财政政策。在萨莫斯和弗曼看来,正确的方式应该是在经济疲软之时放开社会项目方面的支出,以提振需求,而且无需担心债务和赤字问题。
他们背后的核心理念在于,社会支出会让消费者获得更多的资金,这样便可以推动经济增长。此外,增添数万亿美元的债务也不会再带来多大的威胁,因为借贷的利率已经相当之低。他们称,这些新的刺激方案出台后,GDP的增幅要高于国债利息的增幅,这意味着即便我们的债务负担最终会出现爆炸式增长,但利息占美国产出的比例将继续下降。不过,所有这一切都建立在利率维持在超低位而且会在此基础上继续下探的奇迹之上。在过去,国债负担的标准测量方法一直都是计算债务占用于还债的国家收入的比例。萨莫斯和弗曼称,当我们的债务占GDP比率飙升至100%以上时(前不久已经成为了事实),不要惊慌。不过还是忘了这个标准吧,因为新的衡量方法是利息占GDP的比重。即便如此,这个数字依然将位于安全地带,而且数万亿美元的社会支出也会让美国充满活力。他们认为,“这些观点是对上一代正统理念的背弃。”
萨莫斯和弗曼承认,其钟爱的这个理论依然存在危险区,也就是利息-GDP占比不能超过2%。请记住这个数字。
这两位经济学家对利率下行趋势给出了精确的范围。这一趋势已经持续了数年,而且最近出现了加速。他们还针对“为什么借贷成本能够长时间地(确实是市场的真实写照)低位运行”给出了一个看似可信的理由。这两位专家对新一轮支出的呼吁存在以下几个潜在的负面影响:首先,我们很难预测利率在一年后或五年后的水平,因为所有债券持有人都希望收益率可以跑赢通胀,而这几年来事实也确实如此,只不过在2020年出现了下跌。说到未来的轨迹有多难预测,美国国会预算办公室(Congressional Budget Office)预测的突然变化便是一个例子。就在今年1月,国会预算办公室预测2021年公众持有的美国国债的平均成本约为2.1%,将在2026年达到2.4%,2030年达到2.6%。然而在12月之前,国会预算办公室将其预测值下调了50%。国会预算办公室当前预测,利率不会无限上升,今年的平均水平仅为1.3%,从2023年至2026年将下探至1.1%或更低,而且连续10年都不会超过2%。如果未来真是如此,那么萨莫斯-弗曼有关利息支出占GDP比重将远低于2%的预测可谓是相当准确。
美国利息成本能够如此低的原因在于:我们的债务期限越来越短,这意味着我们每年需要不断地偿还越来越多快速增长的债务。这个变化在去年是如此之大,以至于联邦债券的平均期限从6年降至5年。美国得发行大批新债券才可以支撑新冠疫情前美国1万多亿美元而且不断增长的循环赤字,以及额外数万亿美元的新开支,而且这些债券的期限都不能够超过一年,只有这样,其利息开支才可以得到控制。拜登领导的财政部很有可能将对更昂贵的10年期和30年期借贷进行展期,并将其转化为类似于6周的短期国债。
未偿债务
政府的监察机构美国政府问责局(Government Accountability Office)近期报告所发布的数字给世人敲响了警钟。在2019年9月的财政年,美国1年或1年期内未偿短期国债达到了24亿美元,其平均收益率为2.1%。这些超短期产品占到了美国借贷额的17%。在2020年年底,短期国债外加浮动利率票据激增至50多亿美元,占到了联邦债务的27%。在美国于2020年支出暴增期间额外借贷的4万亿美元中,超过三分之二的资金都来自短期国债。这些债券当前的收益率为0.2%,是12个月前的十分之一。
即便在今天,超过半数的美国债务都采用了10年至30年期的债券,这些债券截至2020年9月30日的收益率分别为3.5%和1.9%。为了让我们的平均利息成本降至国会预算办公室预测的水平以及萨莫斯和弗曼期望的水平,财政部必须不断地偿还那些期限不足一年、即将到期的新国债。
这个“大手花钱以刺激经济大幅增长”的解决方案可能会在两个方面出现问题。科克兰说:“它其实就是一个风险管理问题。这个过程意味着承担大量的风险。”首先,它有可能实现,但能够肯定的是,利率在今后数年之内都无法跑赢通胀。收益率崩塌的部分原因可能在于危机引发的急剧收缩。一段时间之后,即便经济只是出现温和增长,但实际利率有可能会转正。从2013年到2019年,10年期利率徘徊在1.5%到3%之间,通胀调整后的平均水平为0.5%。因此,当GDP在今年晚些时候或在2022年超出2019年的水平时,长期债券收益率很有可能会超过国会预算办公室以及萨莫斯和弗曼预测的1%左右的范围。
如果在仅仅6年的时间内,美国债务的平均利率便达到了国会预算办公室去年1月预测的2.3%的水平,那么《财富》杂志估计,我们的利息支出将远超6000亿美元,至少占GDP的2.4%,部分原因在于届时的债务规模将在27万亿美元左右,而2019年为16.8万亿美元。如果拜登遵从萨莫斯和弗曼的意见,提高借贷额,那么这个占比只会更高,而且比两位经济师所提出的2%的警戒线高出了20%。
万一出现问题怎么办?
第二个最紧迫的威胁也是科克兰感到最为棘手的一个问题。他并不认为社会开支的提升会成为经济的补药。他问道:“借贷大量的资金然后发放给社会真的就可以让经济更快地增长吗?此举并没有让法国富裕起来,其人均年收入是4万美元,而美国为6万美元。”科克兰认为,实际利率在未来四至五年中会依然为负值。在此期间,除了拜登承诺的额外数万亿美元的社会开支之外,受医保(Medicare)和医疗援助(Medicaid)无限制的扩张影响,我们依然得去应对大量不断增长的赤字。他说:“如果出现问题怎么办。如果再次出现疫情,意大利破产,或美国与中国发生冲突该怎么办?我们已经借贷了数万亿美元的资金,以期用其推动经济增长,而且我们需要在几个月内对超过5万亿美元的国债进行展期。医保和医疗援助改革压根还没有开始。到某个时刻,债券市场将达到饱和。外国投资者会说:‘我们需要5%的利率。’大国也可能会发生债务危机。”
科克兰在总结时强调了一个经典错误(很多企业和家庭都如此认为)的危害:用短期借贷来资助我们的长期投入。由于我们使用短期国债偿还的新借贷是如此之多,如果利率猛增,我们的利息支出可能会出现爆发性增长。他说:“这与美国在二战期间发行40年期国债并不相同,而是更加类似于在2006年使用可调整利率抵押贷款购买100万美元的房产。这些借贷者与萨莫斯和弗曼一样,认为利率永远不会上升,但利率最终却上涨了。说不定这次它会再次上涨,给所有人一个惊喜。”
对于萨莫斯、弗曼以及由珍妮特•耶伦领导的拜登团队而言,有一个观点是正确的:开支的大肆扩张是为了重振深陷债务泥潭的经济,而且到一定程度之后会引发一场革命。然而,这里存在一个很大的风险:他们认为已经发生彻底变化的这个世界将回归常态,而且他们所谓的革命带来的并非是繁荣,而是毁灭。(财富中文网)
译者:冯丰
审校:夏林
有鉴于美国当前面临着战后历史上最大的债务和赤字,而且短期内没有缓解迹象,新任总统乔•拜登通过数万亿美元新债重振经济的计划看起来似乎十分鲁莽。然而,一个由新政府内外民主党经济师兼官员组成的知名智囊团则认为该计划不失为一个良策。其理论在于,美国已经进入了一个全新的范式时代:利率将在很长一段时间内保持低位运行。因此,堆积如山的新债务也不会带来什么威胁。
危险在于:利率的前景确实发生了重大变化,然而我们无法知道这一下行趋势将持续多长时间。简而言之,拜登的方案已经成为了美国经济政策史上最大胆的赌注之一。如果困难时期再一次降临美国,那么巨额的债务和赤字所引发的结果可能会与这些智囊的预测恰好相反,因为对美国国债的抛售将导致利率飙升,继而让美国陷入大萧条,而唯一的出路就是调高不利于增长的税收。保守派智囊团胡佛研究所(Hoover Institution)的约翰•科克兰说:“始终靠巨额赤字来维持运转是不现实的。低息这种手段有其作用,但无法为此买单。此举可能会推高利率。以‘刺激’之名而肆意借贷的数万亿美元新债将进一步推高所有债务的利息,继而导致出现我所称的‘噩梦场景’。”
在美国总统大选结束三周之后,两位最有威望的民主党经济师发布了一篇工作论文,为拜登用于基础设施、教育、家庭援助以及各城市、州援助的新开支洪流计划提供了专家佐证。在其研究《在低利率时代对财政政策的重新思考》(A Reconsideration of Fiscal Policy in the Era of Low Interest Rates)中,美国财政部前部长拉里•萨莫斯和美国前总统贝拉克•奥巴马的首席经济顾问詹森•弗曼认为,美国需要对财政政策发起“一场革命而不是改进”。在他们看来,此举十分必要而且在美国的可承受范围之内,因为他们认为美国当前的超低利率新环境还会持续10年或更长的时间。
拜登政府的财政部部长珍妮特•耶伦似乎也有着同样的观点。耶伦在今年1月举行的美国经济协会(American Economic Association)一项活动中称,即便债务大幅上升,美国的利息负担依然在承受范围之内。因此在她看来,如果出现新一轮的经济放缓,政府可以推出更多的刺激方案。
萨莫斯和弗曼指出,人们预计利率在当前环境下可能会上扬,因为他们会顺理成章地认为,当前居高不下的赤字和债务会让投资者感到担忧,而且对企业和资本收益税的削减固然会提升投资的利润,但也会引发资本的激烈竞争,从而推高企业和政府债券的收益率,而且这个背道而驰的现象正在发生。新发行的10年期国债如今的收益率约为1%,要远低于当前的通胀水平,这意味着我们已经迈入了一个“实际利率”为负值的时代。这两位作家称,市场预计这一现象会持续很长一段时间,并指出10年期通胀保值债券的收益率也处于负值区间,反映了国债收益率至少在未来十年内将落后于通胀的投资者预期。
是什么导致利率在超低位运行,为什么人们坚信这一利率会在未来持续很长时间?萨莫斯和弗曼称,美国企业已经学会更加高效地使用资产,他们提到了职场人士会经常在家办公,而且即便在办公室办公,其所用的空间也在缩减;他们还提到了爱彼迎(Airbnb)和特斯拉(Tesla)如何赋予汽车和房屋更多的用途。股东希望公司通过回购返还更多的利润,而不是将钱投入工厂,这类要求可能会减少资本支出。制造IT设备的科技公司已经大幅降低了其成本,削减了自身在新计算机和路由器方面所需的资金支出。另一个因素是人口结构:由于美国人的寿命更长,他们在职场时会将更多的收入用于投资,因此“储蓄的供大于求”将让资本池充盈起来,而这些资本能够助力各大公司的发展,并保持借贷成本的低位运行。
他们认为,利率已经是相当之低了,而且不会有太大的波动,正因为如此,美联储(Federal Reserve)已经没有空间通过低息货币来推动经济发展。他们说,美联储“当前在加速经济增长方面做的都是无用功。”国家需要将这一任务交给财政政策。在萨莫斯和弗曼看来,正确的方式应该是在经济疲软之时放开社会项目方面的支出,以提振需求,而且无需担心债务和赤字问题。
他们背后的核心理念在于,社会支出会让消费者获得更多的资金,这样便可以推动经济增长。此外,增添数万亿美元的债务也不会再带来多大的威胁,因为借贷的利率已经相当之低。他们称,这些新的刺激方案出台后,GDP的增幅要高于国债利息的增幅,这意味着即便我们的债务负担最终会出现爆炸式增长,但利息占美国产出的比例将继续下降。不过,所有这一切都建立在利率维持在超低位而且会在此基础上继续下探的奇迹之上。在过去,国债负担的标准测量方法一直都是计算债务占用于还债的国家收入的比例。萨莫斯和弗曼称,当我们的债务占GDP比率飙升至100%以上时(前不久已经成为了事实),不要惊慌。不过还是忘了这个标准吧,因为新的衡量方法是利息占GDP的比重。即便如此,这个数字依然将位于安全地带,而且数万亿美元的社会支出也会让美国充满活力。他们认为,“这些观点是对上一代正统理念的背弃。”
萨莫斯和弗曼承认,其钟爱的这个理论依然存在危险区,也就是利息-GDP占比不能超过2%。请记住这个数字。
这两位经济学家对利率下行趋势给出了精确的范围。这一趋势已经持续了数年,而且最近出现了加速。他们还针对“为什么借贷成本能够长时间地(确实是市场的真实写照)低位运行”给出了一个看似可信的理由。这两位专家对新一轮支出的呼吁存在以下几个潜在的负面影响:首先,我们很难预测利率在一年后或五年后的水平,因为所有债券持有人都希望收益率可以跑赢通胀,而这几年来事实也确实如此,只不过在2020年出现了下跌。说到未来的轨迹有多难预测,美国国会预算办公室(Congressional Budget Office)预测的突然变化便是一个例子。就在今年1月,国会预算办公室预测2021年公众持有的美国国债的平均成本约为2.1%,将在2026年达到2.4%,2030年达到2.6%。然而在12月之前,国会预算办公室将其预测值下调了50%。国会预算办公室当前预测,利率不会无限上升,今年的平均水平仅为1.3%,从2023年至2026年将下探至1.1%或更低,而且连续10年都不会超过2%。如果未来真是如此,那么萨莫斯-弗曼有关利息支出占GDP比重将远低于2%的预测可谓是相当准确。
美国利息成本能够如此低的原因在于:我们的债务期限越来越短,这意味着我们每年需要不断地偿还越来越多快速增长的债务。这个变化在去年是如此之大,以至于联邦债券的平均期限从6年降至5年。美国得发行大批新债券才可以支撑新冠疫情前美国1万多亿美元而且不断增长的循环赤字,以及额外数万亿美元的新开支,而且这些债券的期限都不能够超过一年,只有这样,其利息开支才可以得到控制。拜登领导的财政部很有可能将对更昂贵的10年期和30年期借贷进行展期,并将其转化为类似于6周的短期国债。
未偿债务
政府的监察机构美国政府问责局(Government Accountability Office)近期报告所发布的数字给世人敲响了警钟。在2019年9月的财政年,美国1年或1年期内未偿短期国债达到了24亿美元,其平均收益率为2.1%。这些超短期产品占到了美国借贷额的17%。在2020年年底,短期国债外加浮动利率票据激增至50多亿美元,占到了联邦债务的27%。在美国于2020年支出暴增期间额外借贷的4万亿美元中,超过三分之二的资金都来自短期国债。这些债券当前的收益率为0.2%,是12个月前的十分之一。
即便在今天,超过半数的美国债务都采用了10年至30年期的债券,这些债券截至2020年9月30日的收益率分别为3.5%和1.9%。为了让我们的平均利息成本降至国会预算办公室预测的水平以及萨莫斯和弗曼期望的水平,财政部必须不断地偿还那些期限不足一年、即将到期的新国债。
这个“大手花钱以刺激经济大幅增长”的解决方案可能会在两个方面出现问题。科克兰说:“它其实就是一个风险管理问题。这个过程意味着承担大量的风险。”首先,它有可能实现,但能够肯定的是,利率在今后数年之内都无法跑赢通胀。收益率崩塌的部分原因可能在于危机引发的急剧收缩。一段时间之后,即便经济只是出现温和增长,但实际利率有可能会转正。从2013年到2019年,10年期利率徘徊在1.5%到3%之间,通胀调整后的平均水平为0.5%。因此,当GDP在今年晚些时候或在2022年超出2019年的水平时,长期债券收益率很有可能会超过国会预算办公室以及萨莫斯和弗曼预测的1%左右的范围。
如果在仅仅6年的时间内,美国债务的平均利率便达到了国会预算办公室去年1月预测的2.3%的水平,那么《财富》杂志估计,我们的利息支出将远超6000亿美元,至少占GDP的2.4%,部分原因在于届时的债务规模将在27万亿美元左右,而2019年为16.8万亿美元。如果拜登遵从萨莫斯和弗曼的意见,提高借贷额,那么这个占比只会更高,而且比两位经济师所提出的2%的警戒线高出了20%。
万一出现问题怎么办?
第二个最紧迫的威胁也是科克兰感到最为棘手的一个问题。他并不认为社会开支的提升会成为经济的补药。他问道:“借贷大量的资金然后发放给社会真的就可以让经济更快地增长吗?此举并没有让法国富裕起来,其人均年收入是4万美元,而美国为6万美元。”科克兰认为,实际利率在未来四至五年中会依然为负值。在此期间,除了拜登承诺的额外数万亿美元的社会开支之外,受医保(Medicare)和医疗援助(Medicaid)无限制的扩张影响,我们依然得去应对大量不断增长的赤字。他说:“如果出现问题怎么办。如果再次出现疫情,意大利破产,或美国与中国发生冲突该怎么办?我们已经借贷了数万亿美元的资金,以期用其推动经济增长,而且我们需要在几个月内对超过5万亿美元的国债进行展期。医保和医疗援助改革压根还没有开始。到某个时刻,债券市场将达到饱和。外国投资者会说:‘我们需要5%的利率。’大国也可能会发生债务危机。”
科克兰在总结时强调了一个经典错误(很多企业和家庭都如此认为)的危害:用短期借贷来资助我们的长期投入。由于我们使用短期国债偿还的新借贷是如此之多,如果利率猛增,我们的利息支出可能会出现爆发性增长。他说:“这与美国在二战期间发行40年期国债并不相同,而是更加类似于在2006年使用可调整利率抵押贷款购买100万美元的房产。这些借贷者与萨莫斯和弗曼一样,认为利率永远不会上升,但利率最终却上涨了。说不定这次它会再次上涨,给所有人一个惊喜。”
对于萨莫斯、弗曼以及由珍妮特•耶伦领导的拜登团队而言,有一个观点是正确的:开支的大肆扩张是为了重振深陷债务泥潭的经济,而且到一定程度之后会引发一场革命。然而,这里存在一个很大的风险:他们认为已经发生彻底变化的这个世界将回归常态,而且他们所谓的革命带来的并非是繁荣,而是毁灭。(财富中文网)
译者:冯丰
审校:夏林
President-elect Biden's plans for sparking the economy by borrowing fresh trillions might seem reckless when the U.S. is facing the biggest debt and deficits in post-war history, with no relief in sight. But a prestigious braintrust of Democratic economists-cum-officials, inside and outside the new Administration, are endorsing the program as sound policy on the theory that we've entered a new paradigm where interest rates will stay so low, for so long, that mountains of new debt pose no threat.
The danger: The outlook for rates has indeed shifted dramatically, but it's impossible to know how long that downward shift will last. Put simply, what Biden is proposing amounts to one of the most daring wagers ever in U.S. economic policy. If hard times strike again, the gigantic scale of our borrowings and shortfalls could provoke just the opposite of what the sages predict, a flight from U.S. Treasuries that causes rates to soar, driving the U.S. into a deep recession where the only escape a growth-crunching hikes in taxes. "You can't run massive deficits forever and ever," says John Cochrane, an economist at the conservative think tank the Hoover Institution. "No magic low rates can pay for that. And doing that runs the risk rates will spike, and the interest on all the debt driven ever higher by the new trillions lavished on 'stimulus' causes what I call the 'nightmare scenario.'"
Three weeks after the presidential election, two of the most prominent Democratic economists issued a working paper that's supplying intellectual firepower for the Biden agenda of turning a torrent of new spending on infrastructure, education, aid to families, and assistance to cities and states. In their study, "A Reconsideration of Fiscal Policy in the Era of Low Interest Rates," former Treasury Secretary Larry Summers and Jason Furman, President Obama's top economic advisor, argue that America needs "a revolution rather than an evolution" in fiscal policy, and what makes that both necessary and affordable is the new world of super-low rates that they expect to last for a decade or longer.
Janet Yellen, Biden's nominee as Treasury Secretary, seems to share their views. At an American Economic Association event in January, Yellen declared that our interest burden is manageable even if debt rises substantially, and that she sees an opportunity for more stimulus in the event of another slowdown.
Summers and Furman note that you'd expect interest rates to be rising in the current climate. It's logical to think that today's towering deficits and debt would be worrying investors, and that reductions in corporate and capital gains taxes that make investments more profitable would be sparking heavy competition for capital that would push up yields on both corporate and government bonds. But that opposite's happening. Newly-issued 10-year Treasuries are now paying around 1%, which is far below the current level of inflation, meaning we're in a world of negative "real rates." The authors say that the market expects that scenario to remain constant for a long time, citing that the yield on 10-year inflation-protected bonds is also in the minus range, showing that investors expect the rates of Treasuries bills to lag inflation for at least the next decade.
What accounts for these ultra-low rates, and the confidence they'll stretch far into the future? Summers and Furman state that American business has learned to use assets a lot more efficiently, pointing to how professionals frequently work from home and even while in offices use less space, and how Airbnb and Tesla generate get a lot more use out of cars and houses. Shareholders' demands that companies return more of their earnings in buybacks instead of investing the cash in plants and fabs may lower spending on Capex, and the tech companies that make IT equipment have greatly lowered their costs, reducing the dollars businesses need to spend on new computers and routers. Another factor is demographics: Because Americans are living longer, they need to invest more of their earnings when they're working, so that the "savings glut" swells the pool of capital that companies can tap to grow, keeping credit cheap.
Rates are already so low––and bound to stay there––they argue, that the Federal Reserve has run out of room to use easy money to fire the economy. The Fed, they say, "'is pushing on a string' when it comes to accelerating economic growth." Nations need to pass the torch to fiscal policy. For Summers and Furman, the right course is to spend freely on social programs to boost demand when the economy is weak without worrying about deepening debt and deficits.
Their core thesis holds that social spending makes the economy grow by putting more money in consumers' pockets, and that adding trillions is no longer a threat because we can borrow at such low rates. All that new stimulus, they claim, will boost GDP a lot faster than the interest on our national debt, meaning that interest as a share of national output will keep falling even though our debt load is virtually exploding––all through the wonder of rates that are not only super-low, but will fall from here. In the past, the standard measure of a nation's debt burden has been borrowings as a share of the national income that's servicing that debt. Don't get spooked when our debt-to-GDP soars over 100%, as just happened, say Summers and Furman. Forget about it. The new metric that counts is interest as a share of GDP. And that number will stay in the safety zone while the trillions in social spending put a fresh spring in our step. "These views," they observe, "represent a departure from the orthodoxy of the last generation."
Summers and Furman acknowledge that a danger zone exists for their pet yardstick, and that interest to GDP begins to look dangerous when it passes 2%. Keep that number in mind.
The two economists accurately recap the downward-trend in rates that's been happening for years, and recently accelerated. They also present a plausible argument for why borrowing costs could stay low for a long time––indeed, that's what the markets are saying. The potential downside to their call for a cycle of new spending is that first, it's hard to predict where rates will be in a year or five years, since everyone from bondholders could demand yields exceeding inflation just as they did for years before the drop in 2020. A guide to how hard it is to call the future trajectory is the sudden shift the forecast from the Congressional Budget Office. As recently as January of this year, the CBO predicted that the average cost of U.S. debt held by the public would be 2.1% in 2021, hitting 2.4% in 2026 and 2.6% in 2030. But by December, the CBO had shaved its forecast by 50%. The CBO now forecasts that instead of rising relentlessly, rates will average just 1.3% this year, falling to 1.1% or below from 2023 to 2026, and not reaching 2% for a decade. If that scenario happens, the Summers-Furman forecast that interest expense to GDP will stay well below 2% is in the bag.
A major reason the U.S. can hold interest cost so low: We're moving to shorter and shorter maturities, meaning that we need to keep redeeming a bigger and bigger portion of fast-rising debt load each year. The that shift was so big last year that the average term on federal debt dropped from six to five years. To U.S. can only hold the interest bill in check by issuing the vast bulk of new debt required to fund our $1 trillion-plus-and-growing recurring deficits before the pandemic, plus the extra trillions in new spending, at maturities of less than a year. It's also likely that the Biden Treasury will be rolling more expensive 10 and 30 year borrowing that matures into the likes of 6 week treasury bills.
Outstanding debt
The numbers, available in recent report from government watchdog the GAO, are alarming. For the September 2019 fiscal year, the U.S. had $2.4 billion in outstanding treasury bills coming due in a year or less that were paying an average of 2.1%. Those ultra-short-term offerings represented 17% of our borrowings. At the end of the 2020 year, Treasury bills plus floating notes had jumped to over $5 trillion, or 27% of all federal debt. More than two-thirds of the extra $4 trillion the U.S. borrowed during the spending explosion of 2020 was funded by Treasury bills. The current rate on those bonds is .2%, one-tenth the number just 12 months before.
Even today, more than half of U.S. debt is in 10 and 30 year bonds that as of September 30, were respectively paying 3.5% and 1.9%. To get our average interest cost to the number the CBO projects and Summers and Furman are counting on, the Treasury needs to keep financing new and maturing loans at less-than-one year maturities.
The "go big on spending to go big on growth" solution could go wrong in two ways. "It's really an issue of risk management," says Cochrane. "This course means taking on a lot of risk." First, it may be probable, but it's by no means certain that rates remain lower than inflation for years to come. It may be that the steep, crisis-driven shrinkage is partly responsible for the collapse in yields. Over time, real rates tend to be positive even when growth is moderate. From 2013 to 2019, the 10-year rate toggled between 1.5% and 3%, averaging .5% adjusted for inflation. So when GDP goes above 2019 levels sometime late this year or in 2022, it's possible that yields on the long bond could rise above the 1% range the CBO and Summers-Furman are predicting.
If in just 6 years, the average rate on U.S. debt reached the 2.3% the CBO was projecting in January of last year, our interest tab, by Fortune's estimates, would be well over $600 billion. That's at least 2.4% of GDP, in part because by then total debt would stand at around $27 trillion, from $16.8 trillion in 2019. That share of national income could even be higher if Biden raises borrowings even more by following Summers-Furman. That's 20% above the 2% that the two economists warned would signal danger.
What if something goes wrong?
The second, more dire threat is the one that most troubles Cochrane. He disagrees that more social spending is a tonic for the economy. "Does borrowing a ton of money and sending out checks really make the economy grow faster?" he asks. "It hasn't made France richer. Their per capita income is $40,000 a year versus $60,000 in the U.S." Cochrane reckons that real rates could well remain negative for the next four or five years. But in the interval, we'd still be running huge and growing deficits driven by the relentless expansion in Medicare and Medicaid, on top of the extra trillions in social spending pledged by Biden. "What if something goes wrong?" he says. "We have another pandemic or Italy goes bankrupt or we get into a conflict with China. "We've borrowed trillions to supposedly fund growth and we need to roll over $5 trillion in Treasuries in a few months. We haven't reformed Medicare and Medicaid at all. At some points the bond market will have had enough. Foreign investors will say, 'We need 5% rates.' Big countries can have a debt crisis, too."
Cochrane concludes by stressing the perils of a classic mistake in made by businesses and families alike: short-term borrowing to fund our long-term commitments. Because we're funding so much new borrowing with Treasury bills that mature in months, our interest expense can explode if rates spike. "It's not like when America was issuing 40-year bonds in World War II," he says. "This is more like buying a $1 million house in 2006 using an adjustable rate mortgage," he says. "Those borrowers thought rates would never go up just like Summers and Furman, and they did. What if they surprise everyone by going up this time, too?"
Summers, Furman, and the Biden team headed by Janet Yellen, are right in one respect. A spending splurge designed to revive an economy already deeply in debt amounts to a revolution. The big risk is that the world they believe has fundamentally changed goes back to normal, and their revolution brings not prosperity, but destruction.