Ask AP: Debt and interest rates, Afghan poppies

The U.S. government has been plunging deeper and deeper into debt, and the White House expects the budget deficit to get close to $2 trillion by the end of the year.

With all this demand for borrowed money, how does the government manage to avoid driving up interest rates?

That's one of the questions in this edition of "Ask AP," a weekly Q&A column where AP journalists respond to readers' questions about the news.

If you have your own news-related question that you'd like to see answered by an AP reporter or editor, send it to [e-mail], with "Ask AP" in the subject line. And please include your full name and hometown so they can be published with your question.

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According to a recent AP article, poppy eradication in Afghanistan is inefficient and hasn't done anything to reduce the Taliban's drug profits. Why not replace poppies with another crop or shut off supply routes? Also, who are the principal users of opium — surely not the U.S.?

Vita Zemaitis

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Your second question is easier than your first. Most of Afghanistan's opium/heroin over the last several years has been going to Europe. But U.N. drug officials say more of the drugs are being bought by users in Pakistan and Iran — traditional transit points to Europe.

And why not just replace poppies? If only it were so simple.

First, the Taliban controls much of southern Afghanistan, where most of the poppies grow. There is no government in the area, and until this year there haven't been enough U.S. or NATO troops to cover the south. Second, poppies command a very high price and grow well in the arid climate here, so it's a great crop from the farmers' point of view. Third, farmers say that Taliban militants force them to grow poppies under threat of death, a claim that seems likely to be true.

U.S. and NATO military forces have started attacking drug supply warehouses and convoys in the last six months. Before that, it was the military's view that drugs were a problem for law enforcement — which doesn't exist in southern Afghanistan.

When the drug mafia-Taliban nexus became too obvious — and profitable — to ignore, NATO command gave troops the green light to attack the narco-barons.

Jason Straziuso

AP Correspondent

Kabul

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How does the government manage to borrow a trillion or more dollars per year but not drive up interest rates?

Dan Punzak

Springfield, Ill.

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Skittish investors have flocked to the safe haven of U.S. government debt — especially during the height of the financial crisis last fall — and that high demand has driven down interest rates on Treasury bonds, notes and bills. The average interest rate, for instance, on Treasury bills in May was just 0.515 percent, way down from 1.994 percent a year earlier.

The decline in rates has made it cheaper for Uncle Sam to service the national debt, which stands at a staggering $11.3 trillion. As investors feel increasingly comfortable with taking on risk, they'll shift money away from bonds, notes and bills, and rates will creep up.

One of the dangers: If gigantic U.S. budget deficits persist, that might spook investors. The White House estimates that the government will rack up an unprecedented $1.8 trillion budget deficit this year. That would be more than four times last year's all-time high.

If investors who put money into this government debt view it as significantly riskier than it is now, they could demand a much higher return from the U.S. to hold that debt. And if the country's borrowing costs go up, that could ripple throughout the economy, raising interest rates for home buyers, car buyers, students and businesses.

Jeannine Aversa

AP Economics Writer

Washington

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Do civil union participants pay the same "marriage penalty" to the IRS as married heterosexuals? And when a civil union is dissolved, is the legal process the same as when a married couple gets divorced?

Tom Jeffs

Edison, N.J.

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Under federal law, the IRS does not accept joint tax returns from any same-sex couple, whether they are united by marriage, civil union or domestic partnership. In the eyes of the IRS, same-sex partners face the same disadvantages or advantages as single people in similar financial circumstances.

As for civil unions, the legal process for dissolving them — in the states that offer this option — is the same as for dissolving a marriage.

David Crary

AP National Writer

New York

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Have questions of your own? Send them to [e-mail].

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