Another Look

Take another look at Wednesday's graph:

The graph shows a general downward trend. Government interest payments as a portion of total interest payments has been trending down since 1960. Also, the government share is quite relatively small: 20% in 1960, falling to 10%, rising to something over 15%, and dropping to 7 or 8% in 2007.

To repeat the obvious: Government interest expense is not "small." But private-sector interest expense is so much larger, and is growing so much faster, that government interest by comparison looks small and is declining.

Now, to the fine points. The graph shows a general decline punctuated by updrafts. Based on the timing, I'd say the updrafts are associated with recessions. The graph shows decline from 1960 to about 1974 where the first updraft begins. Other updrafts begin at or around 1981, 1990, 2001, and 2008.

Yep. Recession dates from the National Bureau of Economic Research

NATIONAL BUREAU OF ECONOMIC RESEARCH

US Business Cycle Expansions and Contractions

Contractions (recessions) start at the peak of a business cycle
and end at the trough.

BUSINESS CYCLE REFERENCE DATES
Peak	Trough
Quarterly dates are in parentheses
April 1960(II) December 1969(IV) November 1973(IV) January 1980 (I) July 1981 (III) July 1990 (III) March 2001 (I) December 2007 (IV)	February 1961 (I) November 1970 (IV) March 1975 (I) July 1980 (III) November 1982 (IV) March 1991 (I) November 2001 (IV)

Source: NBER

Link: NBERNote: Earlier recessions have been omitted from the list.

match up well with updraft dates. It is in times of recession -- times of private-sector decline -- that the government portion shows increase.

So what does this tell us? As long as the economy's growing, it's growing on credit. While it is growing, interest costs in total are growing so fast they make government interest costs look small. While the economy is growing, the use of credit grows faster than our government grows. That's what the graph says.