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Just a Thought on the Debt Compromise Debacle

August 2, 2011

I wrote this as a response to a commenter back in April. It still holds true today and it illuminates how I feel about politicians playing politics with the economy, rather then economically looking at spending and asking real questions (about how debt was created and the urgency of addressing it during a recession)  to get real answers .

“Do you believe that the US economy will miraculously grow faster than the interest on the debt?”

My Responce:

Yes, a one year T-Bill has a 0.2% interest rate while the maximum 30-year T-Bill has a 4.4% interest rate. Most T-Bills hang around the 10 year range with a 3.3% interest rate. The average U.S. GDP growth rate from 1947 to 2010 was 3.3%. So with GDP growth rates within a realistic historic range, it is entirely possible to pay the interest. Now imagine what we could do to pay off the debt (not just the interest) if we wound down the Wars or cut other discretionary spending just a little. In fact under Clinton’s presidency, the projected FY2015 Budget surplus would have entirely paid off the entirety of U.S. debt with some to spare.

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