Debt crisis(for the US) overblown? Comments

[touhy]

I'd be curious to hear your thoughts....He almost makes me feel better...at least as long as interest rates remain low.

http://www.minyanville.com/businessm...als&from=yahoo

[touhy]

Re: Debt crisis(for the US) overblown? Comments

From the article:

interest payments (not total debt service, which includes payment of principal) as a percent of GDP are equivalent to about 1.4% of GDP. Let me repeat: US government interest payments are only equivalent to roughly 1.4% of national income.

Furthermore, if we factor in long-term inflation of about 2.5%, the US is essentially paying a real interest rate of about 1.00% on its debt. This translates into a real interest burden of about 0.4% of real GDP. This is almost an insignificant figure.

[*T*]

Re: Debt crisis(for the US) overblown? Comments

From the article:

interest payments (not total debt service, which includes payment of principal) as a percent of GDP are equivalent to about 1.4% of GDP. Let me repeat: US government interest payments are only equivalent to roughly 1.4% of national income.

Furthermore, if we factor in long-term inflation of about 2.5%, the US is essentially paying a real interest rate of about 1.00% on its debt. This translates into a real interest burden of about 0.4% of real GDP. This is almost an insignificant figure.

It's misleading to describe GDP as 'income'. Turnover would be a more appropriate analogy. The correct comparison would be interest expense to tax receipts.

[we_are_toast]

Re: Debt crisis(for the US) overblown? Comments

It's misleading to describe GDP as 'income'. Turnover would be a more appropriate analogy. The correct comparison would be interest expense to tax receipts.

I Really dislike deficit/interest/debt comparisons to GDP. There's a strong implication that GDP will grow at a healthy rate and that tax receipts will track that growth. Taxes are constantly changing and the political will to increase taxes to cover deficits isn't there. The emphasis should be on tax receipts and the discussion should be, how will we increase those receipts to cover our increasing debt. GDP is a level of abstraction intended to confuse more than inform.