Annual interest payment on National debt, as a percentage of GDP in early 1980s, and continued during the Bush administration but has fallen since then until budget surplus was achieved in 1999. Note that public debt is the total of all outstanding debt owed by the treasury to its individuals and institutional lenders. The increased consumption by the present generation crowds outs investment and reduces the growth of capital goods. The future generations will have smaller capital stock and wealth. Paying off the debt in the future by future generations may be inherent if we don t pay now.
Future generations have to pay off the debt by increasing taxes.
If the debt owned by foreigners had been invested in useful projects then the d bet is not a problem. That is if the debt has been invested in productive projects, such as education which creates human capital in the future, or any other projects that yield a rate of return greater than the cost of the debt. This will create net investment for the future generations. There is a linkage between Federal deficit and foreign trade deficits because part of the money financed the budget came from abroad. When there is large deficit foreigners, who hold U.S. money will spend more on U.S. government securities, bonds and less on U.S. goods and services.