Which is only a problem if you can show you're forgoing vital services for it.
Example: 30 billion, at say, 2% interest per year (which a government could easily get, and the US can currently do much better then) is only 600 million interest repayments. And remember, this is before accounting for inflation, since the loan can be repaid with much cheaper dollars in the future (i.e. inflation usually sits at around 2%, and a government can tweak that as needed).
US debt servicing currently compromises about 7% of the annual budget. So there's no imminent risk that interest payments couldn't be paid for out of general revenue.
Even if the US really needed 600 million per year of some service, it would _still_ make more sense to take out the 30 billion loan, plough 28.8 billion into infrastructure or other investments, then spend 600 million on those services, 600 million on financing the interest, and repay the entire thing with simultaneously cheaper dollars in the future _and_ the new revenue they've generated from growth.
The only _real_ danger, is the risk you may have to run a larger fraction of your annual revenue into debt servicing if you can't refinance. But you can put money aside to account offset that contingency, and still borrow.
We spend about $190 billion a year paying interest on our debt, out of $2.45 trillion in revenue. That's about 7.8%, which is not an unsustainable large number by any stretch of the imagination. To use the ever-dubious household analogy, it's like a programmer ($150k/year salary) having a $650 car payment. Maybe the ideal car payment for someone bringing home around $8000/month is more like $500 or below, but it's not exactly the height of fiscal irresponsibility.
Interest expense for the fiscal year of 2012 was actually 360 billion. And interest rates are at record lows, lets just say that interest rates jump back to average levels, then your looking at more than doubling that amount over the next 10 years as the debt gets refinanced and more debt gets added. Hardly sustainable. And the Fed is deliberately keeping interest rates at a ridiculously low level, so that the debt burden can be kept low, but we can't have that forever and things aren't looking too good in the near future.
The interest rate is controlled by the Fed, which is effectively a branch of government.
Also, inflation concerns (by reasonable people) only occur when the economy overheating. An overheating economy automatically reduces the government deficit via increased tax flows and reduced social security spending.
Treasury bills have a fixed-rate coupon. We pay more for older ones issued when interest rates were higher, but if we issue lots of them right now we'll still be paying 2.91% interest in 2043 when the bonds are retired. The idea is that when the economy expands further and interest rates rise, we don't borrow as much because a) revenues will be higher as well, which is good and b) it would be more expensive to borrow then, which is bad.
My mental model is that if inflation is 2%, the nominal interest rates are 2% higher than the real interest rate. How much does inflation affect the real interest rate?
A lot of the US debt is short-term; plus the US has a primary deficit.
The average interest rate over the past 50 years has been something like 5% [citation needed on my own number]. If we hit that, we will very quickly need to pay more money, and a lot of that old debt rolls over each year.
The US does not have a debt problem in 2013; as has been said, we can borrow at effectively zero. The US might very well have a big debt problem in 2018 or 2023.
My question was what's the relationship between nominal interest rates and real interest rates. Naively, it seems to me that we should care more about real interest rates than nominal interest rates (in which case why do we care about inflation, which just changes the measuring stick?).
