Thursday, August 18, 2011

The Tea Party: Fundamentally Wrong... Again

Not good at economics and not good at math.  That pretty much sums up the Tea Party's (in)comprehension of macroeconomics.  Yes, we're all being crushed by the interest on the debt.  Except that we're not.

Source: CBO (via CEPR)
As the chart shows the interest to GDP ratio is currently at a crushing 1.3 percent, near the post World War II low. However this figure overstates the burden somewhat. Last year the Federal Reserve Board refunded almost $80 billion to the Treasury. This was interest earned on government bonds and other assets it now holds. That leaves a net interest burden of 0.8 percent of GDP, by far the lowest of the post World War II era.

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