Economist James Hamilton: Let me begin by stating what I perceive to be the core policy question: are high sovereign debt loads something we should worry about, and if so, why?
The main reason that I personally am concerned arises from the fact that, for any level of the interest rate, a higher debt load means that the government will permanently need to spend more money just to pay the interest on the debt. This is not a matter for arcane debate, but rather is a consequence of the most basic arithmetic. At the moment, the interest rate on U.S. government debt is extremely low, so that despite our high debt load, the government’s net interest cost is currently quite reasonable. However, most projections call for interest rates to rise over the next few years, and the most recent assessment by the CBO notes that consensus interest-rate forecasts and existing fiscal legislation imply that within a few years, the U.S. interest cost will be bigger than the entire defense budget, and bigger than all of non-defense discretionary spending.
–excerpted from a post by James Hamilton at EconBrowser.com