Lots of folks complain America has too much debt (Bunk 45). And we do have plenty—but one reason the debt isn’t so problematic is because paying for it isn’t as expensive as most folks fear. Our debt interest payments, as I write this in 2010, are quite low—even low compared with recent history.
As 2009 ended, America was spending over $300 billion each year just making net debt interest payments. Yikes! Sounds like a lot, but isn’t. This is another case of big, scary numbers taken out of context. We have a massive economy, so items like debt and interest payments can seem unfathomably huge. As with many “big” numbers, a simple debunkery is to consider it in scale—as a percentage of GDP—which is the right way to think about it.
Figure 46.1 shows US net debt interest payments as a percentage of GDP. Amazingly, paying for our debt, even at more elevated levels, is now about 2.2 percent of GDP and perfectly unremarkable compared to past periods.
Our net debt interest payments are lower now than any time between 1979 and 2002—which includes the big 1980s and 1990s bull markets—and not all that far above where they were in the 1950s and 1960s. Interest payments relative to GDP were nearly double what they are now from about 1984 through 1996—perfectly fine times for stocks and the economy overall.
Figure 46.1 US Federal Interest Payments as a Percentage of GDP—At Pre-1980 Levels
Source: Thomson Reuters, Federal Reserve Flow of Funds, US Bureau ...

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