(via Power and Control ⇒ HillBuzz)
Why are you a racist?
I nominate erp for “Best Comment of the Month”!
Because I went to a Tea Party protest.
Okay then. Your credentials are in order.
Actually, the chart’s wrong. It might show the national debt, but it’s certainly not the deficit. Even Obama’s 2010 deficit (at $1.5 trillion, almost a trillion dollars higher than Bush’s largest deficit) is only about 10% of GDP. The national debt, at $12.4 trillion, is about 82% of GDP. But all that really matters is the debt held by the public ($7.8 trillion) which is about 50% of GDP.
Why does only the debt held by the public matter?
In terms of the effect of debt, debt owned by the government itself can’t really have an effect.
Except that the debt owned by the gov’t represents promises made to the public. While those are the easiest debts on which to welch, (and so we will), both carrying the debt and repudiating it do have costs, financial, political and social.
“Except that the debt owned by the gov’t represents promises made to the public.”
Not all of it. For example, somewhat less than $1 trillion is held by the Fed from their open-market operations and represents promises to absolutely nobody.
The costs of welching on the “trust funds” are probably not much different than welching on any entitlements (which are something like $50 trillion at the moment, depending on how you calculate them).
I think the main point is that there is no net interest payment on said money.