Summary: As policy makers grapple with the debt ceiling, the podcast digs into the notion of a balanced budget. While tying the debt ceiling limit to a balanced is an appealing to some fiscal conservatives, in reality “extreme” fiscal responsibility is likely impractical, and getting to balanced budget will require deeper structural changes to the government budget.
In mid-October, Congress raised the national debt limit to prevent defaulting. This episode discusses how the United States got into this mess, where all this debt comes from, who came up with the idea of a debt ceiling, and what happened when it was paid off.
Keynesian economics was particularly popular after the Great Depression. Keynes revolutionized how government involvement in the economy was seen. Keynesian theories are still applied in financial crises today.
In the wake of the Covid-19 pandemic, the Federal Reserve has lowered its interest rates to 0%. The Fed has been practicing quantitative easing in order to ensure individuals can sell Treasury bonds whenever they need to. Planet Money discusses whether this will be enough to prevent a recession from occurring.
Original Air Date: March 16, 2020
Length: 18 minutes 17 seconds
Written Assignment Prompt: Pretend you are the chair of the Federal Reserve. How would you deal with the Covid-19 pandemic to help prevent a coming recession? How would you adjust interest rates or the money supply during this time?
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