There are two things that matter in government-debt dynamics: the difference between real interest rates and GDP growth (r-g), and the primary budget balance as a % of GDP (ie, before interest payments).

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The simple r-g assumption is one of the most important in debt dynamics: an r-g of greater than zero (when interest rates are greater than GDP growth) means that the debt stock increases over time.

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Tom Coburn (R-OK) has indicated that he would support higher tax rates at the top as part of a budget compromise that would include reductions in spending.

FORBES: Key GOP Senator Says Yes To Higher Tax Rates In Compromise

R. 8 raised all of the taxes that negatively impact economic growth (the top rates on ordinary income, dividends, capital gains, and inheritances), while capping those that have little or no effect on the rate of GDP expansion.

FORBES: Paul Ryan Brilliantly Evokes Clueless Conservatism

As European peripheral countries have found out to their cost, interest rates increase when governments run large budget deficits, and as they do it becomes increasingly difficult to reduce r-g to a sustainable level.

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