As a result of persistently low interest rates, payments for net interest are expected to remain low despite the burgeoning debt.Really? Isn't that a nice bedtime story. They are counting on the federal reserve to continue to keep borrowing costs down. The average interest rates the feds pay is around 2%. But the fed's quantitative easing is likely to ignite inflation eventually. As recently as 2000, the treasury paid an average of 6.5%. So instead of a mere $454 billion hole in the budget, under more normal conditions, we might be liable for well over a trillion dollars per year in interest. That would be bigger than the entire defense budget, bigger than social security payments.
The Federal Reserve can't keep interest rates low forever. Eventually, inflation will ignite and force their hand. This debt will become a huge drain on the economy, far greater than the budget projections of the CBO show. Interest rates in the early 80s spiked at the 12% range. It was bitter medicine needed to ring inflation out of the economy, and it worked. Can today's economy survive the almost $3 trillion per year hit that 12% interest rates would cause? That's more than the entire revenue of the federal government in 2011. Who would loan the U.S. money under those conditions? The country survived a hyperinflation scare in the late 70s. We had a much more manageable debt ratio. I don't think we could handle it now.
So, what do you think, bigots? Is this a race tinged discussion or what?