If you are of the Paul Krugman school of fantasy economics, you likely believe federal debt is good and that eventually we will grow out of it (except we continue to add new spending on automatic pilot, i.e. Obamacare subsidies). If you have a more conservative bent, you see debt as bad, except I guess during some of the Bush years. Debt is necessary, but must be managed for the long-term.
One thing I believe we can all agree in is that debt must be paid for. For example,
Note the percentage of the federal budget that currently goes to debt service. That’s essentially wasted money, except if you are the recipient of Treasury interest. Keep in mind that interest rates are still very low. When rates climb as they will in the next few years, borrowing money will become more expensive with the risk of consuming more of the federal budget. Prudent management would seem to dictate gradually lowering the debt, but the current administration puts forth a budget that intentionally adds more to the debt each year. In prior years the excuse was the need for stimulus to get us out of the recession, what’s the excuse now?
If we only had no significant growth in the federal budget, we would chip away at the debt, but in the never, never land of Washington, a slight reduction in the increase in spending is saving money and a fiscal disaster. Debt is good. Debt is bad. Somebody is wrong.
Sooner or later debt will become a drag on the economy. Sooner or later managing debt will require higher taxes and not just on the one, two or three percent. Sooner or later managing debt will require changing entitlements. Younger Americans better worry about the later part.
Here are the facts on national debt from the Treasury Department.
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