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It is a post-financial-crisis myth that austerity-minded conservative governments always favor fiscal prudence, while redistribution-oriented progressives view large deficits as the world's biggest free lunch.In 2012, at the height of the standoff between the Republican-controlled Congress and Democratic President Barack Obama over deficits and the national debt, Republican presidential candidate Mitt Romney proffered an economic plan that featured eye-popping deficits to finance tax cuts and higher military spending.Indeed, at the end of the 1990s, some researchers actually wondered how international markets would function if the U.S. government gradually retired all of its debt.The Nobel-laureate economist Thomas Sargent and others recently argued that the optimal level of debt for the U.S. is in fact very close to zero, though he does not recommend trying to get there anytime soon, given that U.S. government debt is now over 100 percent of GDP.If interest rates shoot up in the Trump era (as well they could), the U.S. government will wish that it had opted for less short-term borrowing and more long-term borrowing.If a Trump presidency does entail massive borrowing – along with faster growth and higher inflation – a sharp rise in global interest rates could easily follow, putting massive pressure on weak points around the world (for example, Italian public borrowing) and on corporate borrowing in emerging markets.
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