Debt and growth - how do you fund government spending?

Simple chart and analysis on Slate concerning debt and growth which has provocative implication. The argument is that interest rates on Treasury have generally been below the growth rate of the US economy. This is good because it suggest that we can potentially grow our way out of debt problems. You can also think about this in terms of the means of financing.

In fact, you can think about the marginal dollar spent by the government and the means of financing. The cost of borrowing is less than the marginal dollar of tax taken from the economy if interest rates are below the growth rate. Debt financing in the past has been good. The cost of financing is especially cheap today; however, this is related to Fed action and we are accounting for this gap based on short-term rates. While this is an interesting graph, it should not be the basis for future policy. The risks are too great that the gap could close or reverse.