cont'd

The essence of Keynes' theory was that the government should "smooth out" the natural business cycle by stimulating the economy in down cycles with government spending paid for by deficits and lower taxes, then when the economy recovers, cut spending and raise taxes to pay back the deficits.  But the latter never happens because, politically, raising taxed gets you de-elected, and most of the stimulus spending has been for entitlements that are difficult to take back.  So, we get spiraling debt.

In 2000, the average interest rate on the National Debt was 6.34% on about $5.7 Trillion, or $361 Billion/yr.  Today, the debt is $20 Trillion, about 3.5 times higher than in 2000.  The average interest rate on that debt over the past year due to artifically low rates has been 2.34%, keeping to cost of servicing that debt at about $460 billion over the past fiscal year, only about 27% more interest on 350% as much debt.  So the Fed "masked" the problem.  cont'd