Forum: US debt more than adequately funded by borrowing

I thank the Ministry of Finance for its letter (Singapore is always prudent with debt, with no net debt, Aug 4) referring to my commentary (Debt is not a dirty word, but…, Aug 3).

I note that the ministry agrees with me that the conventional criterion most commonly used by the International Monetary Fund and market participants to rank countries by debt levels - the debt-to-gross domestic product (GDP) ratio - is inadequate to assess national credit-worthiness, whether we are talking about Singapore, the United States, Japan or China.

For Singapore, the ministry and I refer to the same measures of credit-worthiness - huge reserves, borrowing for infrastructure spending, a AAA credit rating and investments by Temasek and GIC.

For the US, however, we disagree. The Ministry of Finance calls the US' debt - moderate by international standards - "high", intimates that it is enabled by the US dollar's reserve currency status, and that the US is "spending beyond its means".

This misses the point of my commentary, which was to note that the US' debt is more than adequately funded by borrowing, and it is therefore not spending beyond its means.

In fact, recent economic research suggests that the US could increase its debt-to-GDP ratio from the current 110 per cent (post-pandemic) to 260 per cent of GDP, the level in Japan, without having to raise taxes.

Linda Lim (Professor)