In a recent op-ed for The New York Times, Nobel laureate economist Paul Krugman addressed the growing alarm regarding the ballooning US debt and provided reassurances that the situation is not as dire as it may seem. Krugman emphasized that while the US currently holds a record-breaking debt of $34 trillion, when viewed as a percentage of GDP, it is comparable to levels seen at the end of World War II and remains significantly below the debt burdens of Japan and the UK.

Krugman pointed out that most historical debt crises have occurred in countries that borrowed in another currency, and the US, as an issuer of its own currency, operates under different circumstances. Drawing parallels to the aftermath of World War II, Krugman highlighted that the US did not fully pay off its debt but rather saw a significant reduction in debt-to-GDP ratio due to economic growth and inflation.

While concerns have mounted over the trajectory of deficits and debt in the coming decades, Krugman stressed that governments do not have an obligation to entirely eliminate their debt. Instead, the focus should be on stabilizing debt as a share of GDP. To achieve this, Krugman referenced a study from the Center for American Progress, which suggests that the US would need to increase tax revenue or reduce spending by 2.1% of GDP.

Krugman argued that increasing tax revenue to stabilize debt levels is not likely to hinder economic growth, as the US currently collects a smaller share of tax revenue as a percentage of GDP compared to other wealthy nations. He acknowledged that while the economics of stabilizing debt are relatively straightforward, the main obstacle lies in political will.

Krugman voiced concerns over the radicalization of the GOP, which he believes hampers effective debt management. He expressed worries about the implications for democracy but also noted that federal debt is not the top priority on his list.

The worsening US debt and deficit situation has garnered attention from prominent figures in finance. BlackRock CEO Larry Fink, JPMorgan CEO Jamie Dimon, and Bank of America CEO Brian Moynihan have all voiced concerns. Additionally, Citadel's Ken Griffin labeled the US as "irresponsible" with its national debt.

Even Treasury Secretary Janet Yellen, in May, acknowledged that the long-term outlook for higher interest rates could pose challenges in managing deficits and debt expenses.

As the US presidential election approaches, the issue of debt has become more significant, raising discussions and concerns among investors and policymakers alike. However, Krugman's assertion that stabilizing debt as a share of GDP is the key to addressing the situation offers a potential solution to alleviate worries surrounding the US debt crisis.