A good portion of the interest is paid to creditor nations like China.
Less than 1/3 of all interest is paid to foreign holders of U.S. Treasuries. On the aggregate, all money earned by foreign entities does not (typically) flow outside of the U.S.; instead, it is reinvested in U.S. dollar denominated assets.
First, high levels of debt mean that too many of our taxpayer dollars are wasted on paying interest.
Qualitative statement lacking substance.
This is money that could have been better spent elsewhere, by letting us all keep more of our hard-earned money or by better funding national priorities such a defense and infrastructure .
To a degree, i agree! However, during a financial recession and the drawn out recovery that follows, increased deficits are necessary to minimizing output gaps. At such times it is insanely beneficial for increases in deficits to flow into infrastructure investment projects; not tax breaks, as these types of expenditures yield the least amount of additional economic activity.
Second, when debt gets high enough or rises fast enough, capital markets do take notice and interest rates will rise. As history has shown in the past this can happen quickly with a dramatic twist. Interest rates on mortgages, car loans and credit cards would go through the roof.
More complicated than that! See our current situation for an empirical example.
Third, inflation could become a problem. As debt rises, the Federal Reserve could turn to an age-old, but dangerous tactic: printing money. This would reduce the value of the debt, but it would also usher in a new age of inflation. OMG all these months of Bernanke propping up the market with all that QE well, at some point is is going all come crashing down.
This comment does not even make sense. If inflation becomes a problem, why the **** would the Fed engage in expansionary monetary policy? You then go back to discuss inflation, only to again change course and make a deterministic statement with respects to a market crash.
By the sounds of it, you have bitten off more than you can chew. It would be best to focus on one topic at a time, as you clearly lack the familiarity with these concepts necessary to properly engage in its discourse.
Fourth, high levels of debt usually translate to much lower levels of economic growth.
Ehh, kind of. Countries that have sustained growth in public debt, in an environment that exceeds nominal growth in output, will eventually face growth constraints as more and more of their respective economies are composed of rent-orientated income generation. Investment in production of goods and services takes second fiddle, which is damaging to long term productivity growth. However, this is not generally the case with the U.S. as our debt issues have stemmed from the financial fallout of two financial bubbles and multiple wars, as this graphic clearly depicts.
We have certainly been experiencing that these past 4 years.
That is what happens when the country experiences a net-wealth loss equivalent to roughly an entire year of economic growth. We have still not recovered from greatest level of wealth lost since the 1930's.