The National Debt

The National Debt

Right now, a few things are happening simultaneously with the economy. The national debt is at a historical high and interest rates are at a historical low, at a time of full employment. One concern is the possibility that there could be a sell-off of bonds, which would drive up interest rates and the cost of servicing the debt. If this happened, one option the central bank has is buying up the bonds, but this would trigger inflation.

The debt burden reduces the number of options for reacting to an economic downturn. With spending in some areas, the benefits clearly out-weigh the costs. In other areas, unnecessary spending should be minimized. 

The nursing shortage is one example of an area that would justify increased spending. This problem doesn't have an easy solution? Schools just need extra capacity to deal with the supply of applicants.

How long are the current low interest rates going to hold up? If they go up for any reason, the service costs go up. It looks like there is a need for research on projected interest rates, and how this will affect the budget.