Harvard's Ken Rogoff Talks US Debt, Fiscal Crisis Risks

**Tom Keene** (0:02)
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 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, Our Dollar, Your Problem. And the new edition of Our Dollar, Your Problem 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?

**Kenneth Rogoff** (0:32)
We're holding up so far. It's just a week away. Our daughter's getting married, but trying to control the budget, just like the US government.

**Tom Keene** (0:39)
Trying to control the budget. Let's do that right now here at Jackson Hole. Ken, I think what's so important here is there was another time and place. You have an op-ed in the FT from a couple years ago. Here's the photo folks, Bill Clinton, Al Gore. There was a time where this is 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?

**Kenneth Rogoff** (1:06)
Super short answer. We've had a couple of 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 has and a lot of academics has.

**Tom Keene** (1:43)
The Besant angle and in your Project Syndicate essay in the last 72 hours, I'll say you go right after Secretary Besant. Glenn Hubbard at Columbia 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 pseudo supply side exercise. Is there any evidence we can do that?

**Kenneth Rogoff** (2:06)
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, whole range of expenditures. And then there are a lot of technical issues around that. Interest rates will probably go up if there's fast growth.
Labor shares falling, that's all over the place. Capital is harder to tax than labor.
So I think with 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?

**Tom Keene** (2:49)
Have you been asked to be in a task force?

**Kenneth Rogoff** (2:51)
No, I wasn't. Make you got those short straws.
I think the world of Kevin Warsh, but I'm just as grateful that I'm not on one of the test forces.

**Tom Keene** (3:00)
That was so smooth, folks. Did you see how Ken Rogoff did that? Ken, let's talk seriously. We had Jack Lew 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?

**Kenneth Rogoff** (3:28)
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.
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, I'm going to fix Social Security in any more than a passing phrase.

**Tom Keene** (4:00)
Silence in the rooms.

**Kenneth Rogoff** (4:01)
Yeah, the people's eyes glaze over. I think it's going to take, that's why my book at the end of it predicts, at some point, this will end in a crisis of some sort to catalyze the change which will be painful.

**Tom Keene** (4:15)
Okay, the rainier is killing my glasses. I'm fogging up like, 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?