What, you may ask do all of these things have to do with each other? Well as the elder bunnies (the ones in the rest home fondly for reasons to be made clear) may recall, Paul Volker pushed interest rates into the stratosphere.
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The thirty year notes at close to 15% financed any number of retirements. If you wonder why mom Rabett is crying in her carrot soup look at the current rates, which are close to negative figuring inflation.
But, and here is where the Volker disaster hits, there are tons of 5, 10 and 20 year notes issues, and treasury bonds are NOT callable, nor adjustable. Issuing a lot of long term bonds at high rates commits to paying that high interest rate over a long term. Looking at federal interest payments over the last fifty years or so
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shows the Volker disaster in the 1980s extending to ~2000. The federal budget is about 20% of GDP, so 1% of GDP is 5% of the federal budget, 4% (height of the Volker disaster) is about a sequester worth, 20%. Thanks Paul.
The rapid decline of interest payments due to the aging of Treasury Bonds, as well as revenue increases from the 1990 and 1993 Bush I and Clinton tax increases, and the improvements in the economy due to same, contributed mightily to the good economic times in the 90s, but left a pot of cash for Bush II to invest in wars, revenue decreases and the unfunded Medicare Part D.
Today, with interests rates still low, so low that probably the rates are negative considering inflation, long term Treasuries can be used to refinance any amount of infrastructure. If people are willing to pay the US to park money, we should be investing in infrastructure like crazy. Not to mention the jobs the stimulus would generate.