Nominal GDP increased $604.9 billion dollars in 2013. The interest payment on the debt for fiscal 2013 was $415.7 billion, consuming almost 69% of GDP.
So far in 2014 nominal GDP is up $787.1 billion. The interest payment on the debt for fiscal 2014 just ended on September 30th was $430.8 billion, consuming almost 55% of GDP to date. At least that trend is in the right direction.
Interest payments on government bonds do not count as government spending in the category of consumption expenditures because they are not related to production as they are in business.
Interest expense has exceeded $400 billion in seven out of the last nine fiscal years.
The national debt stood at $17.824 trillion on September 30, 2014. The fiscal year interest expense of $430.8 billion therefore represents an interest rate on the debt of 2.42%. The 10-year Treasury currently pays 2.31%.
Now you may understand the Federal Reserve's Zero Interest Rate Policy, and its never-ending message to Congress pleading for fiscal restraint. Interest rates cannot be repressed forever without social unrest. Democrats need reminding that such restraint involves spending, while Republicans need reminding that it involves both spending restraint and necessary taxation. They could make a start by recognizing that income inequality begins by treating some money more equally than other money.
It's a waste of time asking Democrats for prudent anything, which is why Republicans now run the show again. We'll see if the Republicans got the message this time. As always, past performance is not a guarantee of future returns.
