The US Debt Can Easily Be Serviced Today

This graph from the St.Louis Fed shows the cost of servicing the US debt as a percent of GDP. The ability to service the debt is more important than the size of the debt relative to GDP. The Treasury can refinance its debt at very low interest rates today. There is little reason to believe that the government faces bankruptcy. On the other hand, this does not mean that low interest rates will always prevail and it does make sense to address the longer term imbalance that we face in our fiscal policy if we do not bring spending and income closer together. Fear mongering in the GOP today is mostly about the 2012 election campaign which is based upon fear of debt that it has raised among the public.