The interest on the national debt is $260 billion per year, on nearly $17 trillion in debt, for an effective interest rate of 1.5%. If that interest rate were to rise to 1980 levels, for instance, at 6% [2] that would be an annual interest payment of over $1 trillion/year.
In order to come up with an extra $700 million per year, the government would have to raise taxes by 25%. Possibly more depending on economic factors.
Now that I have run the numbers it seems that this is not as much of a Ponzi scheme as I thought but it still seems pretty bleak. Has anyone seen this video[3] of Japan's debt problem?
Note that the U.S. holds fixed-interest debt. If interest rates go up it will be forced to refinance at higher rates, but it will happen over some period of time. The weighted average maturity of the debt right now is over 5 years, so it's not like it'll be an extra $700 billion all of the sudden.
In any case, a worrying level of debt does not make something a Ponzi scheme...
The interest on the national debt is $260 billion per year, on nearly $17 trillion in debt, for an effective interest rate of 1.5%. If that interest rate were to rise to 1980 levels, for instance, at 6% [2] that would be an annual interest payment of over $1 trillion/year.
In order to come up with an extra $700 million per year, the government would have to raise taxes by 25%. Possibly more depending on economic factors.
Now that I have run the numbers it seems that this is not as much of a Ponzi scheme as I thought but it still seems pretty bleak. Has anyone seen this video[3] of Japan's debt problem?
[1]: http://www.usdebtclock.org/
[2]: http://www.usgovernmentspending.com/year1980_0.html - It appears that the government spent on interest about 6% worth of its total debt.
[3]: http://www.youtube.com/watch?v=Njp8bKpi-vg