More substantive problems associated with public debt include the following:

(a) Payment of interest on the debt may increase income inequality.

(b) Interest payments on the debt require higher taxes, which may impair incentives.

(c) Paying interest or principal on the portion of the debt held by foreigners means a transfer of real output abroad.

(d) Government borrowing to refinance or pay interest on the debt may increase interest rates and crowd out private investment spending, leaving future generations with a smaller stock of capital than they would have had otherwise.