Real growth, government nominal rates and the ten year rate

The blue line is what government pays on its debt, the total interest cost/total debt, yearly.  That is the effective cost of debt for DC. The ten year nominal rate is the red. The green is real growth change yearly. This includes the social security trust fund, the full 18 trillion in debt.

Should I use real GDP growth, the green? Yes, because we make a basic assumption that government income goes with real growth. Feel free to change that assumption.

This is what the OECD tells us about growth rates and interest rates. What interest rates are they using, the one year bond?  DC uses a ten year or higher budget window and payer the ten year rate plus a half point.

So why does the US Berkeley economics department keep insisting the OECD chart on the left applies?


We are, today, effectively paying about 3.67%, including the trust fund, the blue line in the first chart. Why does DC always pay a premium for debt? Bad planning, their budget windows are uncertain for most large programs in DC. They end up getting caught short and have to shift liabilities to the long end. That takes money out of the economy to cover interest rate loops, and that causes deflation.