Is America in fiscal trouble?

Concerns about the U.S. deficit have surged, but worries about the fiscal situation of the United States are nothing new.

So, is this time really different?

I'm Allison Nathan, and this is Goldman Sachs exchanges.

Each month, I speak with investors, policymakers, and academics about the most pressing market-moving issues for our top of my report from Goldman Sachs research.

This month, I spoke with two people who have long worried about the U.S. fiscal trajectory,

economist Ken Rogoff, a professor at Harvard University, and historian Neil Ferguson, of Stanford's Hoover Institution and Harvard's Belfour Center. Both agreed this

time is different and are worried about the U.S. fiscal situation today. So I started by asking

them why that is. Here's what Ken Rogoff had to say. I think the big change is that global,

long-term real interest rates have risen. In my opinion, they've normalized. The whole

stuff about lower forever secular stagnation was always wildly overblown. And I've been debating

this for over a decade saying that if you look at the longer-term behavior of real interest rates,

they go in cycles, but there's a lot of regression to mean, and no one should have ever

planned on their being low forever. So a lot of what you're calling fiscal concerns is a much broader movement towards

higher interest rates that has to do with, well, certainly higher global debt is a piece of it.

But I would also say global fragmentation, geopolitical uncertainty, the need to build energy to accommodate AI,

remilitarization of the world and the costs of that. So I think long-term bond rates will continue to

creep up, not go down. The whole idea that many people still

have, that they're going to go back to the pre-pandemic levels, I think is dreaming. That's just not

going to happen. And the rise in interest rates is affecting everything. It's not just

public debt. It's affecting all markets. But particularly for countries that have gotten used to, not just not paying down their debt, but running it up and up and up, particularly the United States, but pretty much everyone.

But is this all about the rise in real interest rates, or do we have deeper issues?

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