The panic about our “mushrooming” national debt continues to grow.  The latest spur to our obsession with the debt came with the news that the Federal Government’s debt is now equal to our Gross Domestic Product (GDP) the most usual number given for our “national income.”

The panic misses the point.  The main concern with debt is not how high it may be, but your ability to service the debt, i.e. repay the debt.  When you buy a house the mortgage depends on your ability to repay, not the size of the debt per se.  Ditto when you buy a car. 

The actual case for our Federal Debt is that interest rates on the debt are so low it actually costs the Feds less to service the debt now than before.  The debt grew from $10 trillion in 2008 to $15 in 2011.  However, the cost to service the debt fell from $242 billion in 2008 to $189 billion in 2009 and only rose to $197 billion in 2010 and $250 billion in 2011.  In other words while the national debt grew by about 50%, the cost to service the debt remained the same or less. 

Of course this interest rate will increase if we ever get a full head of steam for economic recovery.  But when that happens we will have less need to incur Federal deficits and the national debt will cease growing. 

I am always amazed at the lack of perspective exhibited by “economists” and other experts when commenting on our economic problems.  Lack of perspective caused the “Great Recession” let’s not have it produce another one with this national debt sophistry.