Defaulting on debt isn't the only way to scare investors

Summary

Marketplace Morning Report: "Defaulting on Debt Isn't the Only Way to Scare Investors"

Release Date: June 2, 2025

In this insightful episode of Marketplace Morning Report, host David Brancaccio delves into two critical economic issues: the complexities of U.S. debt and its impact on investor confidence, and the growing debt burden among Generation X retirees. Through expert interviews and in-depth analysis, the episode sheds light on the underlying factors threatening financial stability and offers strategies for managing debt in retirement.

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1. U.S. Debt and Investor Confidence

Sabri Benashore opens the discussion by addressing the persistent concerns surrounding U.S. debt amidst ongoing legislative processes. As the tax and spending bill navigates through Congress, the specter of the national debt continues to loom large.

Key Insights:

• Treasury's Stance: Treasury Secretary Scott Bessant asserts, "[00:38] the US would never default on its debt," yet acknowledges that defaulting isn't the only pathway to erode investor trust.

• Julia Coronado’s Perspective: Julia Coronado, founder of Macro Policy Perspectives and Professor at the University of Texas, Austin, provides a critical analysis:

  • “[01:38] The US can always pay the treasury debt it owes by creating money, but the real question is the value of those dollars upon repayment.”
  • She warns against the dangers of excessive money printing, highlighting potential inflation and loss of confidence among treasury security holders, which could lead to higher bond yields and a weakened dollar.

Notable Quote:

"There's really no fiscal discipline, no end in sight to large and rising deficits that the US is running." — Julia Coronado [01:38]

Benashore further probes the ramifications of the U.S. potentially printing money to service its debt:

“What’s the problem with that?” he asks. Coronado responds: “If you do too much of that, that can become inflationary...you could lose the confidence that people have in holding dollars.” [02:32]

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2. Gen X and the Retirement Debt Dilemma

Shifting focus, the episode examines the alarming rise in debt among households over 65, particularly highlighting Generation X's struggles with balancing debt and retirement savings.

Key Insights:

• Generational Debt Trends: Professional planners typically advise retiring debt-free, yet the proportion of older households with debt has surged since the late 1980s. Generation X, now the oldest members reaching 60, finds themselves deeper in debt compared to other generations.

• Balancing Responsibilities: Personal finance columnist Kerry Hannon explains:

  “This is a generation that's really caught between caring for aging parents and raising kids and putting kids even into college.” [04:45]

• Strategic Financial Planning: Senior economics contributor Chris Farrell outlines actionable steps for those nearing retirement:

  • Debt Assessment: “I recommend first to get a realistic snapshot of your debt. What do you owe and what are those interest rates?” [06:23]
  • Budgeting Essentials: Focus on covering necessities like housing, food, and healthcare while identifying and cutting discretionary expenses.
  • Extending Workforce Participation: Mark Miller emphasizes the benefits of working longer to delay Social Security claims, thereby increasing monthly benefits and providing additional income to manage debt.

    “Working longer can really be helpful in...generating higher monthly benefits.” [07:04]

Notable Quotes:

“Despair is not an option...Think about it as sort of a menu of options.” — Mark Miller [05:41]

“The best time for older adults to start tackling their debts is right now.” — Chris Farrell [07:59]

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Conclusion

The episode effectively intertwines the macroeconomic challenges of national debt with the personal financial struggles of Generation X retirees. By featuring experts like Julia Coronado, Chris Farrell, and Kerry Hannon, Marketplace Morning Report provides listeners with a comprehensive understanding of the issues at hand and practical solutions to mitigate financial risks.

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This summary captures the key discussions and expert insights from the episode, offering a clear and concise overview for those who haven't tuned in.

Transcript

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[Sabri Benashore]

Defaulting on debt is not the only way to scare investors from Marketplace I'm Sabri Ben, ashore in for David Brancaccio. As the tax and spending bill continues to wind its way through Congress, questions about the US Debt have not gone away. Over the weekend, Treasury Secretary Scott Bessant said the US Would never default on its debt, but the US doesn't have to actually default in order to lose the confidence of investors who would, by the way, in turn charge the US More to borrow. Julia Coronado is founder of Macro Policy Perspectives and a professor at the University of Texas, Austin.

[Julia Coronado]

It's true that the US can always pay the treasury debt that it owes. It has a printing press. It can create money. The question really is around what will the value of those dollars be when you get them back? There's really no fiscal discipline, no end in sight to large and rising deficits that the US Is running. And there's also a lot of sort of breakdown in rule of law and transparency and just the rising risk of the US As a counterparty. So they're doing things like threatening to tax treasury interest, which is a form of default. It's a form of saying, I'm not going to give you back what you expected to get back when you bought this treasury security.

[Sabri Benashore]

If the US Were to just print money to pay its debts, what's the problem with that?

[Julia Coronado]

Well, if you do too much of that, that can become inflationary. And you also run the risk of losing the confidence of people who buy treasury securities, and they may choose to sell them. And that would put upward pressure on on bond yields and downward pressure on your currency. So you could just lose the confidence that people have in holding dollars. So it's a very risky strategy. It's a temptation that many governments have succumbed to. Sometimes we do that effectively during crises. So it's a matter of what is the overall system for managing your money, and is it something that people have faith and trust in?

[Sabri Benashore]

That was Julia Coronado there, founder of Macro Policy Perspectives.

[Oregon Lottery Representative]

In the summer all of Oregon is our playground thanks to our incredible park system. That's why it's so cool that Oregon Lottery gameplay like video lottery or cash pop help support tons of parks projects statewide, like accessible trails at Silver Falls State park or upgrades to your favorite dog park in Newburgh. It's just one way a little lottery play from many Oregonians can add up to a lot of good the Oregon Lottery. Together we do good things. Lottery games are based on chance and should be played for entertainment only. Must be 18 or older to play.

[Sabri Benashore]

With few exceptions, professional planners recommend retiring with no debt. Yet the share of households over age 65 with debt is up sharply since the late 1980s. Things might get even harder for the coming generation of retirees. Gen X the oldest Gen Xers are 60 years old, and by several measures they're deeper in debt than other generations. With the latest in our series Buy now, pay later, here's senior economics contributor Chris Farrell.

[Chris Farrell]

Saving for retirement isn't easy, but finding money to set aside for our elder years is especially hard for Gen Xers. Many are taking care of both children.

[Kerry Hannon]

And aging par this is a generation that's really caught between caring for aging parents and raising kids and putting kids even starting into college at this point.

[Chris Farrell]

Kerry Hannon is a personal finance columnist and co author of Retirement A genyx Guide to Securing your Financial Future.

[Kerry Hannon]

They came into the workplace when retirement 401s were just getting started.

[Chris Farrell]

While many households have little to no retirement savings, those Gen Xers with savings have money in plans like 401. These plans weren't easy for workers to manage when relatively new and retirement savings are exposed to the risks of market volatility.

[Kerry Hannon]

They don't have a backlog of savings, and what's happened for them is debt.

[Chris Farrell]

Despair is not an option. Of course, there are steps that can benefit workers nearing retirement with little savings and lots of debt.

[Mark Miller]

So I think that the goal here is to get to retirement without debt or with a manageable amount of debt, and to be able to generate the highest amount of guaranteed lifetime income, namely Social Security. So I think there are some steps that people can look at towards that goal. They're not necessarily easy to do, but I think these are the realistic things that are worth thinking about. Think about it as sort of a menu of options.

[Chris Farrell]

Mark Miller is a journalist and author of Retirement Common Sense Financial Strategies for Getting Back on Track. What are some of the key items on that menu of options? Financial planner Tanya Brinston emphasizes the need to gather accurate household financial information.

[Sabri Benashore]

I recommend first to get a realistic snapshot of your debt. What do you owe and what are those interest rates? Then create a realistic budget, you know, one that focuses on covering those essentials.

[Chris Farrell]

Like housing, food and healthcare, miller adds. Then ask yourself what expenses can be cut.

[Mark Miller]

Do everything you can to scrub your expenses. Take a look at the large recurring items that you're spending on every month and ask yourself if there's some things there you can do without for a while while you try to right the ship.

[Chris Farrell]

Working longer can also shore up household.

[Mark Miller]

Finances When I say longer, I mean longer than you might have initially planned. I don't mean that to say never retire, but working longer can really be helpful in a number of ways. It can help you push off your claim of Social Security, which can generate higher monthly benefits. When I say push off, I mean that income from a job can pay living expenses while you wait to file for Social Security, and it just generates income from the job that perhaps could be used to pay down debt and maybe to start to accumulate some savings.

[Chris Farrell]

Small steps like these build on one another, reinforce each other, and gradually improve household finances.

[Kerry Hannon]

What are some things you can do right now to take control and get financially fit? Because that is going to be the ticket to having a healthy retirement, and not necessarily wealthy, but a healthy one.

[Chris Farrell]

The best time for older adults to start tackling their debts is right now. I'm Chris Ferro from Marketplace.

[Sabri Benashore]

Our Buy Now, Pay later project is in partnership with Next Avenue, a nonprofit news platform for older adults produced by Twin Cities PBS in New York. I'm Sabri Benishore with the Marketplace Morning.

[Chris Farrell]

Report.

[Sabri Benashore]

From APM American Public Media.

[Katie Drummond]

Hi, I'm Katie Drummond. I'm Wired's Global Editorial director, and I'm excited to be joining the hosts of our flagship podcast, Uncanny Valley. It's a show about the people, power and influence of Silicon Valley. It's hosted by some amazing Wired writers and editors, where each week they discuss the influence of technology and culture from the Valley on our everyday lives. But we're also adding another episode to that feed, hosted by me. Each week I'll have an urgent conversation with one of our extremely busy wired reporters or editors about this Week in News. Our journalists are constantly asking smart questions to find out where they lead and to help you understand where the world is going a little bit better. I hope this new weekly episode does just that. Make sure you're following Uncanny Valley in your podcast app of choice so you don't miss an episode.