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Old 05-07-2010, 01:14 PM   #5
HotHotHeat
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IMO National Debt is not as big of a burden as some (especially in the media) might suggest. By no means are a lot of those number 'healthy', but if you look at them strictly as numerical values with a base point of zero, you freak yourself out way too much. "Debt affordability" is worth looking up.


Some reading that might help...

I think I've come up with a simple little number that could help steer the conversation away from hysteria, back towards objectivity: I call it the "TIT Ratio," which stands for "Times Interest Taxed." (I mentioned it at the end of my review of Walker's IOUSA movie.) It's simply the number of times our federal tax receipts covered the interest obligations on the publicly-held federal debt.

I like it a lot better than the debt/GDP ratio because it's more to the point. In debt/GDP, debt (a "stock") is just a crude proxy for interest payments because it ignores the interest rate, and GDP (a "flow") is just a proxy for tax receipts. In contrast, the TIT Ratio is a coverage ratio that directly measures interest payments and tax receipts (both "flows"), and it's more timely. It's similar in concept to "Times Interest Earned" used in private sector finance as one gauge of a firm's creditworthiness. Here's a chart of the USA's TIT Ratio since 1998.




http://www.optimist123.com/optimist/...ebt/index.html

Last edited by HotHotHeat; 05-07-2010 at 01:16 PM.
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