Example: Federal Debt

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This example compares power, exponential, and logistic models of an accelerating upward trend in a data set. It then looks at the differing extrapolated values and contrasts them with official predictions.

The U.S. Federal government has a long history of spending more money each year than it receives. The yearly shortfall in money received compared to money spent is called the (annual) Federal budget deficit.

When you spend more money than you receive, you eventually go into debt, i.e., you will have to borrow money in order to pay your bills. This is also true of the Federal government, which, because of the annual deficits, has accumulated an enormous debt.

When you go into debt, the individuals and institutions that lend you money charge interest, computed as a percentage of the amount of money you currently owe on your loan. Interest is a fee paid to the lender on a regular schedule, such as monthly or yearly. The Federal government is no different: It must also pay interest on the huge Federal debt.

The following table, from the U.S. Department of Treasury, shows actual and extrapolated gross Federal debts (including the interest).