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Two tales of federal debt Why people disagree on the level of the federal debt

There’s much disagreement on whether the federal government’s debt is too high. Here are two ways of looking at this perfectly understandable question.

The top graph shows the federal debt as a share of GDP. You want to compute such a share because the federal debt over long horizons depends on the size of the economy. There’s been a marked increase in debt in response to the past recession, and it has leveled off at about 100% of annual GDP. Some consider that high. Some consider that too high.

The bottom graph multiplies the series above by the 10-year Treasury rate. This represents how much the debt costs, as a share of GDP. Here we see the cost is remarkably low—of course, thanks to low interest rates. Note that this is an approximation, as not all debt is in 10-year Treasuries and the issue dates vary greatly in the portfolio. But including other interest rates gives the same general picture. Looking from this angle, some consider the debt to be too low.

How these graphs were created: For the top graph, search for “federal debt” and the series of it as a share of GDP should be among the top choices. For the bottom graph, use the first graph and go to the “Edit Graph” section: Add a series to the first line by searching for “10-year treasury rate” and applying formula a*b/100.

Suggested by Christian Zimmermann.

View on FRED, series used in this post: GFDEGDQ188S, GS10

They say nothing beats a home-cooked meal Comparing price inflation of food at home and away from home

The graph shows the evolution of two price indexes: food consumed at home and food served in a restaurant. It’s striking how the price of food served to you has kept increasing, while the price of food you prepare yourself has either increased more slowly or even decreased. In fact, the difference between these prices has increased by 61% over the sample period, meaning that the ratio of restaurant food prices to home food prices is 61% higher now than it was in 1953. What do we make of this? After all, the basic ingredient for both is the same: agricultural products. The difference is that restaurant meals also include a substantial service component: Other people prepare the food and serve it to you. While agriculture has benefited from big-time productivity enhancements, the same cannot be said for the manual labor provided in a restaurant. As real wages increase, the kitchen and wait staff become more expensive more quickly than the goods they prepare and serve, which is why our restaurant bills grow more quickly than our grocery bills. To be fair, we don’t usually pay ourselves to do our own grocery shopping, cooking, serving, and dishwashing. Or, for that matter, give ourselves a 20% tip.

How this graph was created: From the CPI release table, select the two series and click “Add to Graph.”

Suggested by Christian Zimmermann.

View on FRED, series used in this post: CUSR0000SAF11, CUSR0000SEFV


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