The Federal Deficit and the National Debt

Using historical data from the Office of Management and Budget, the Congressional Budget Office, and the Organization for Economic Co-operation and Development, the author argues that that the current method of expressing the federal deficit and/or debt as a percentage of GDP obscures the danger posed by potentially higher interest rates. While the debt and deficit may still be at manageable levels, the situation could deteriorate much quicker than we might imagine, substantially raising the governments opportunity cost of servicing the national debt and diminishing the economic well being of American business and consumers.JEL Classification H62