Does the high and rising level of U.S. public debt matter? If so, how concerned should we be?

Goldman Sachs asks those questions in a new research piece, noting that the “fiscal outlook for both Italy and the US looks poised to go from bad to worse” — and yet, the market response to the two situations, as measured by yields on Italian bonds and U.S. Treasuries, “couldn’t be more different.”

Italian bond yields have surged since May as investors worried about the new government’s fiscal policy. Meanwhile, the rise in yields on 10-year Treasuries has been more muted — “despite the fact that the US deficit projections look significantly worse,” Goldman noted. (The yield on 10-year Treasuries rose above 3 percent on Friday for the first time in more than a month.)

To gauge the importance of public debt, Goldman’s Allison Nathan turned to two outside experts, Harvard economist Carmen Reinhart and Maya MacGuineas, president of the Committee for a Responsible Federal Budget. Here are some key points from each response, along with Goldman’s own view.

Reinhart: High debt levels are associated with lower economic growth rates over the long term. “This is in part because high debt levels constrain governments’ ability to respond to adverse shocks. So even in a country like the US, where I don’t expect a crisis, history suggests there are reasons to be concerned. … The most desirable way to reduce debt is through growth, and countries should take advantage of periods of relatively stronger growth to reduce debt. This of course is the opposite of the current approach in the US.”

MacGuineas: “As bad as the fiscal situation is, I don’t think a crisis is likely anytime soon. The US has the benefit of being a safe haven; we seem capable of being at the very heart of a global crisis and still attracting demand for US Treasuries. … And, so far, markets have been able to show remarkable optimism in the face of a very pessimistic fiscal situation because many other factors in the economy and in corporate America have been favorable. But fiscal health is one of the foundations of the economy. And when you are built on such an unsustainable foundation, should market sentiment tip in a negative direction for any number of reasons, the response is likely to be more severe than if we had a healthy balance sheet. Again, we just don’t have the fiscal flexibility to address a major shock. So I believe we are on thin ice that can crack at any time. … The twisted silver lining here is that hurtling ourselves toward rock bottom, as we are today, may force action sooner than would otherwise be the case. And the likely return of a trillion-dollar deficit next year may be the wakeup call that we need.”