Intro
Harvard economist Kenneth Rogoff sits down at Jackson Hole about an hour before he addresses the symposium over lunch, and argues the United States will not deal with its debt or its entitlement programs until a crisis forces it to. The conversation covers what academic economists got wrong about interest rates, the case against growing out of the problem, the kind of shock that would push yields to a breaking point, an eventual collapse in AI, a paralyzed Congress, and grade inflation at Harvard.
Guest: Kenneth Rogoff, professor of economics at Harvard, author of Our Dollar, Your Problem and co-author of This Time Is Different
Published: 28 August 2026 on Bloomberg Talks
Listen on Omny | 8 min
Key Takeaways
The debt built up on an academic conviction that rates would fall forever
Rates reversed, and Rogoff says Washington and much of the academy did not
The global financial crisis and the pandemic account for the rest
Growing out of it is not a plan
Faster growth brings more revenue but also more demands on spending, and probably higher interest rates
The labor share is falling, and capital is harder to tax than labor
Nothing gets fixed until a crisis convinces voters something has to happen
His book ends on that prediction, and he says the change will be painful
The trigger is a shock the country cannot absorb, not a yield level
He names a cyber war, an artificial intelligence event, and most likely China and Taiwan
When the market pushes rates up, the Fed cannot simply cut and the government cannot simply print
A spectacular collapse in AI is coming, and it is not a sell signal
He points to Shiller and Greenspan calling the last one early
Fixing it later means bigger steps than fixing it now
Congress is sidelined and paralyzed, and the same fight is playing out in the UK and France
A Wedding Budget and a Government Budget
The interview is recorded at Jackson Hole, roughly an hour before Rogoff speaks to the assembled symposium over lunch, which the show calls its conversation of this Jackson Hole without question
The show plugs his book, Our Dollar, Your Problem, and mentions that a new edition is out
The family news supplies the segment's running joke: his daughter is getting married in a week, and he says they are trying to control the budget, just like the U.S. government
What Economists Got Wrong About Interest Rates
The show opens the substance with a photograph from Rogoff's own FT op-ed of a couple of years ago, of Bill Clinton and Al Gore, and asks how the country got to the irresponsibility of 2026
Two catastrophes account for part of it, he says: the global financial crisis and the pandemic
The larger cause he names is intellectual rather than fiscal: "a near religious conviction among academic economists in the journals that interest rates were going to go down and down and down" — the logic being that if you never have to pay interest, it does not matter how much you owe
He says that conviction has dominated the political landscape, and that it has been a big topic at the symposium for years and years
The rates moved and nothing else did: "The interest rates have reversed, but Washington hasn't, and a lot of academics hasn't."
Why Growing Out of It Is Not a Plan
The show notes that his Project Syndicate essay from the last 72 hours goes right after Treasury Secretary Bessent, and cites Glenn Hubbard at Columbia for the idea that you can do supply side but may not grow with it, then asks whether there is any evidence the country can grow its way out
He allows that it might, but starts from the position that the country is already infinitely rich and ought to be able to pay its bills even if it grew really slowly
Faster growth arrives with its own bills: more tax revenue in the future, but also more demands on expenditures
The technical objections he lists: interest rates will probably go up if growth is fast, the labor share is falling, and capital is harder to tax than labor. He says there are many other reasons interest rates are going up
Asked about the war in Iran, he counters with populism instead, and not just in the U.S. but all over the world
Asked whether he has been invited onto a task force, he says he was not, that he thinks the world of Kevin Warsh, and that he is just as grateful not to be on one of them
Nothing Gets Fixed Until a Crisis Forces It
The show recalls having had former Treasury Secretary Jack Lew on, and his line that day one after the presidential election the country needs a panel and needs to get something done about Social Security, then asks Rogoff what the first task is for straightening out entitlements
"Honestly, I think it's going to be very difficult to do until we have a crisis that convinces voters something has to happen." Voters, he says, are not convinced
Some economists are finally coming around to the view that it may not have been the free lunch they said it was, and that inflation and financial repression are how the bill eventually arrives — but he says that is still not the dominant political position
A candidate who runs on entitlements in 2028 loses the room: people's eyes glaze over
His book ends on the prediction: at some point this ends in a crisis of some sort that catalyzes the change, and the change will be painful
The Shock That Turns Debt Into a Crisis
Asked what 10-year yield or 30-year bond marks the point of crisis for the American public, he declines to name a level and points at the debt level itself, which he says is already difficult at where it is
"The crisis comes when a shock happens and you're not resilient."
The war in Iran was a mini shock, he says, compared with what could happen
Over the next five years, the candidates he names are a cyber war, some kind of artificial intelligence event, and most likely China and Taiwan. A war-type shock is the scenario that pushes interest rates up
Both of the usual escape routes close at once: the Fed cannot just cut interest rates if the market is pushing them up, and the government cannot just print money if the market is pushing them up. In this environment, he says, that is a big risk
A Spectacular AI Collapse That Is Not a Reason to Sell
The show puts This Time Is Different to him, crediting Reinhart and Rogoff with conflating public and private borrowing responsibly, and asks whether more than $40 trillion of private assets combined with what it calls Wall Street's new addiction to private equity and private credit puts the country on that path again
"of course there's going to be some kind of spectacular collapse in AI at some point, which doesn't mean you should take your money out of AI"
Being right early is the same as being wrong: he recalls Shiller and Greenspan famously predicting the collapse of the stock market, the market rising further before it eventually fell. The collapse came, but the timing was terrible
The prescription is speed: the U.S. government needs to take steps, and they will be much smaller and easier steps if it does so sooner. He says he does not see any signs of that happening
Congress Is Sidelined, and So Is Everyone Else
The show reaches back to Barber Conable of House Ways and Means, whom it credits with telling Nixon it was time to go, as its example of a normal congressional process that no longer exists, and asks where Congress fits into the crisis Rogoff sees coming
He says Congress is sidelined and paralyzed at the moment, though there are many members on both sides of the aisle who are aware of the problem
Awareness is not the constraint: it is hard to catalyze action
The same failure is playing out everywhere: he points to the UK and to France, and to what happened to Macron when he tried to raise the retirement age
With the French election coming up right now, his read is that they are going to get murdered
Grade Inflation at Harvard
A listener email from Jason in Cambridge sets up the closing question, which the show puts to him as the question of the afternoon: is there grade inflation at Harvard economics?
He concedes it directly: absolutely there was, and a new policy is coming into place to try to deal with it
His own standing moved without him moving: when he arrived at Harvard he learned from the dean's complaints that he was one of the easiest graders. He did not change a thing, and over 20 years students began telling him he was the hardest grader at Harvard
Told he is brutal and ruthless, he says he is not trying to be, and that he is trying to be fair and reasonably generous
Rogoff's bottom line is that the debt is already large enough that the next shock the country cannot absorb becomes the crisis, and that neither Congress nor voters will move on it until that crisis has actually arrived.
Books & Resources Mentioned
Our Dollar, Your Problem – Kenneth Rogoff (His book, with a new edition out; it ends by predicting that the debt problem gets resolved only through a painful crisis)
This Time Is Different – Reinhart and Rogoff (The show's frame for asking whether today's private equity and private credit build-out is a repeat)
Rogoff's Project Syndicate essay (Published in the last 72 hours; the show says it goes right after Treasury Secretary Bessent)
Rogoff's FT op-ed (From a couple of years ago, and the source of the Bill Clinton and Al Gore photograph the show opened with)
Get the latest market chatter and takes as they happen:
X | Threads | Instagram | YouTube | TikTok | Facebook