Economists made a model of the U.S. economy. Our debt crashed the model

Summary

People have been worrying about U.S. debt basically ever since there even was a U.S. “The accumulation of debts is a most fearful evil,” Thomas Jefferson wrote in 1787. At the time, U.S. debt was around $40 million. Today, it’s closer to $40 trillion. At the same time, the U.S. economy is bigger and more powerful than Jefferson could have ever imagined, and things are looking pretty good: unemployment is near record lows, inflation is under control… so what’s the problem?“Part of the problem is it's been this kind of ‘boy who cries wolf’ type thing, and people just get tired of it,” says Kent Smetters, an economist at Wharton, who has been crying wolf about the debt for years. He started to wonder: What exactly happens if the U.S. just doesn’t deal with its debt? He got a few economists and mathematicians together to build a computer model of the economy to play out scenarios. They made a model of the entire U.S. economy, which required a lot of computing power. “This math problem was a big one,” Smetters said. “And the model computations are about 20,000 times bigger than our standard model.”Smetters borrowed some computing help from Amazon and NASA and then he and his colleagues then fed the entire U.S. economy in all of its complicated glory into this mega-model. And the U.S. economy… could not compute. “Their economic models crashed when trying to project out the economy over the long term,” said Jessica Riedl, an economist with the Manhattan Institute who studies the budget. “We cannot even model out a functioning long-term economy under current debt projections.”The crash itself: not super cinematic, said Smetters. No flashing red letters, no skull and crossbones, no lightning bolt, just a few words that make a macroeconomist’s blood run cold: Model not converging.“The model's trying to find what's called a fixed point where everything just adds up, everything's consistent, and it's not able to do that,” Smetters explained.In other words, if the debt keeps ris...