NYT Editorial: The Interest Must Be Paid

Published: May 29, 2006

Recent stock market turmoil has been a plus for United States Treasury securities. Over the last couple of weeks, investor demand for safety has generally pushed up the price of the benchmark 10-year Treasury bond, making it cheaper for the government to borrow. But there is still plenty of reason to worry about the United States' borrowing binge.

By definition, federal borrowing eventually results in a transfer of income from American taxpayers, whose taxes go to pay the interest on the debt, to the investors who hold the Treasury bonds. As long as the bonds are owned by Americans, the transfer is simply from one group of citizens to another. Bond holders may get richer, while taxpayers who don't own bonds get poorer, which could add to troubling disparities in personal wealth. But shuffling the income between the two groups doesn't reduce America's overall wealth.