U.S. Rep. Hansen Clarke, D-Michigan: Congress Is Obsessed With the Wrong Kind of Debt

[marmar]

Congress is now completely focused on reducing debt. This would be a positive development, if not for one detail: it's focused on the wrong kind of debt.

With over a quarter of all American homeowners "underwater" -- owing more on their homes than their homes are worth -- and total student loans slated to exceed $1 trillion this year, it is household debt, not government debt, that is constraining spending, undermining confidence, and precluding sustainable long-term growth.

For all the hysteria about government debt, one simple fact remains: the cost of government borrowing remains extremely low. The federal government can raise funds in the short term at interest rates of almost zero; the benchmark 10 year U.S. Treasury bond yields is just three percent, an extremely low long-term rate. This is a powerful statement that international markets have confidence in the US government's finances.

In stark contrast, a hardworking American who lost his or her job in the recession and fell behind on a credit card payment might be subjected to usury-level interest rates of up to 30 percent. .................(more)

The complete piece is at: http://www.huffingtonpost.com/rep-hansen-clarke/congress-is-obsessed-with_b_912494.html

[dkf]

1. What will those rates look like if we defaulted or get downgraded?

If our reps don't understand this relationship they don't understand what the point of all this is and are pretty useless.