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The trend line is the same direction whenever the budget is in deficit. Is it your contention that any country that ever runs a deficit, any size, in any economic conditions, is "bankrupt"?

Nope. I think we've discussed before? The trend line that worries me is the percentage of the budget needed to service debt. That's what is getting Greece. They can't borrow enough to roll over their notes.

We are still selling ours, at low rates, but I think there is some question as to how much of it is being bought by the Fed, and their agents.

The fact that China seems to be selling now, and Japan is holding isn't good. Who is going to buy $1 Trillion a year in US debt, for the next X years? Of coures we can raise rates (Geithner, hated by everyone, deserves a lot of credit for keeping our rates so low). But raising rates means that the big hunk of bonds we need to sell to roll over and service debt just got bigger.

Those are the trends that worry me.

Obviously, a better management of our budget could start to turn this around, restore trust, keep rates down.

Do these things bother you at all?

In 2009, total interest expense was $383 billion. That is down from $451 billion in 2008, on lower average rates. Total interest expense was $364 billion in 1998, 12 years ago, and $344 billion in 1996, 14 years ago. The price level is up by 32% and 36% since those years, and GDP is up by 60% and 80% respectively. Federal interest expense is 2.65% of GDP right now, and it was 4.3% and 4% in those years. In the cycle peak year, 2008, interest expense was $451 billion, which was 3.14% of GDP.

You don't go broke with interest expense under 3% of income, especially with an income that rises 6-7% a year on average. The average American homeowner spends 16% of income on debt service, and the average renter (counting rent) 25%. And they aren't broke either, with a $54 trillion net worth overall.

It might make some sense to worry about debt service costs if long term interest rates were 8-9% - meaning, 2-3 times current levels and above the rate of growth of the overall economy. But in the nature of things, that could not and would not be sustained.

The immediate cause of the current high deficits is the recession, and not debt service costs. Federal receipts of all forms fell from a peak annual rate of $2.683 trillion in the 4th quarter of 2007, to $2.188 trillion in the 3rd quarter of 2009, the last for which full figures are available. That is a $500 billion drop in revenue, or an 18.5% "tax cut". At the same time, transfer receipts to households (government benefits paid to them, including state and local) have increased by $400 billion, from $1.772 trillion to $2.175 trillion, all at annual rates.

A $500 billion tax cut and a $400 billion increase in handouts blew the original deficit hole. Unnecessary additional "stimulus" spending, plus some one-off TARP stuff that is accounted for as a current item rather than a capital item, account for the remainder. The unnecessary stimulus stuff should certainly be stopped and the TARP expense allowed to reverse as loans are paid back and the like. But the idea that it is the cost of servicing the debt - interest - that is causing our fiscal stress, is completely wrong.

The change in interest expense since the late 90s is less than $50 billion a year. The change in tax income just since 2007 is 10 times as large. The change in transfer payment spending is also 10 times as large, and together they are 20 times as large.

In short, its the economy, stupid...