Looking at interest expense as a percent of the federal budget

Niall Ferguson has it right (and corrected), though Brad complains. Here is the Fred graph we need. It shows interest expense as a percent of budget. Notice the 1980 to 2000 period, we spent high percentage, mainly on short term debt.  If we grow, our interest expense will grow, but the more accumulated debt we have, the more it grows as a percent of the budget. Hence the federal government needs to keep a more conservative hold on accounts as growth takes off, least it get stuck with interest rates rising from 11 percent of budget to 22 percent, and rising further since we now have twice the debt as Clinton. Rising to 40% would be a reasonable expectation.

Again economists, one again the key is the derived cycle.  When the rollover period for all that debt is large compared to say, ten years, then a cycle is induced, but the cycle is noticed (the interest rate roll over rate procyclical) and  encapsulated by the hedge funds and politicians.  Then there is a sudden contraction of taxes, but government is so late in the rollover, it is not ready to respond, and the fed is stuck.