ABSTRACT
This chapter explores why deficits and the debt matters. The discussion is prefaced with a brief primer on the debt, placing it in the larger context of government finance. The chapter turns to an examination of normative dimensions of the debt, focusing on the implications for intergenerational and intragenerational equity. The chapter concludes with some practical issues. It explores whether excessive debt compromises economic growth or raises the probability of fiscal crises. It considers whether large foreign bond holdings should raise concerns. From the perspective of this chapter, the most significant issue is the extent to which servicing a growing debt can deplete resources that could be devoted to other uses. While the costs of servicing debt have been low in the past few decades, interest payments are projected to become the largest component of federal spending in the next few decades, comparable to the largest mandatory programs.
