To appraise the effect of the federal budget deficit on interest rates, it is necessary to compare the deficit, not to the debt to GDP ratio (a contrived figure), but to the VOLUME OF CURRENT SAVINGS made available to the credit markets. The 2006 deficit (406 billion interest expense) is absorbing about 23 percent of gross private savings. FY2006 total debt is the sum of: federal and state & local governments, international, and private debt, incl. households, business and financial sector debts, and federal debt to trust funds (50.5 trillion).

As written in June 1980::
One of the principal purposes of the Act was to provide the housing industry with a reliable source of funds. That may be achieved through various governmental and quasi-governmental corporations.But the role of the S&Ls in housing finance will probably diminish significantly.

By becoming commercial banks and having a larger spectrum of loans to choose from, the S&Ls will act like banks and whenever possible eschew “borrowing short and lending long”. Sources of mortgage funds will shift from the subsidized rates heretofore provided by the small saver to “bond-backed” sources which will reflect the higher interest rates prevailing in the loan-funds markets.These factors combined with higher trend rates of inflation should result in a pronounced upward trend in mortgage financing costs.

25 years ago, tires sucked.

25 years ago, cars started breaking down after 2-3 years.

25 years ago, most people paid for gas with cash, not credit cards.

25 years ago there were no cell phones. If you broke down, well, that *really* sucked.

Driving these days is much less stressful than 25 years ago.

The chart explains more than you know, tying together your question, fiscal problems, the credit crises, lack of energy policy, and why the nation choose this administration…..TWICE!!. For it is common knowledge amongst the cognoscenti (according to 1984 cult hit Repo Man: “The more you drive, the stupider you get…”

Gasoline at $4+ per gallon might be part of the reason for quick mortgage walk aways in the ‘xurban’ areas.

Given the choice of trading in two gas hogs for two econoboxes or walking away from a nonrecourse mortgage, home buyers upside down on mortgages and without access to credit for the new fuel efficient vehicles are between a rock and a hard place.

Perhaps the Fed/Treasury should concentrate on providing credit for econobox purchases?

I don’t like the idea, just sayin’.

River

Actually the country did get bigger–in population. In 1970, there were only 203m Americans (33% more now). This will account for a good portion of the increase in driving (your measurement is in total miles driven) but not all of it. You’ll need some econometric jiu-jitsu to figure out how much, though.

Betcha toenails to teacups that most of those extra miles resulted in SOME kind of economic exchange. Even for the parking sessions under the bridge.

We drive to spend and spend to drive.