The Costs of Servicing Debt

The Costs of Servicing Debt

There is a good argument for having zero national debt. Sometimes the benefits from deficit spending outweigh the costs. When this happens, there is a good argument for some additional spending. This spending becomes more cost prohibitive as interest rates rise.

There's tax revenues, then there's the percentage of the revenues that go toward servicing the debt. As the debt increases and interest rates increase, this percentage increases.

The revenues that unnecessarily go toward servicing the debt have opportunity costs. Except in cases where the benefits outweigh the costs, interest payments are money straight down the drain. Depending on how much this is, the revenues could be used to solve a lot of problems. Or, taxes could be cut, which would leave consumers and businesses with more to spend.

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