In his book The Science of Fear, Daniel Gardner notes that when asked the question "How many millions are in a billion?" nearly half the population either doesn't know, or answers wrong.

"So how," Gardner asks, "will [people] react when they're told that the arsenic levels in their drinking water are three parts per billion? Those who don't know what a billion is can only ... press the panic button."

Three parts arsenic per billion is actually nothing to worry about -- 10 is the national standard, so anything under that amount is better. But 3 parts per billion just sounds scary if it's not put into appropriate context.

Same goes for economic numbers these days. You don't need to look far before you want to hit the panic button: A trillion-dollar deficit here. A hundred-billion dollar bailout there. Big, scary, numbers everywhere.

Take national debt. The current total is $12.4 trillion, which sounds positively terminal, and has provided fodder for political shouting matches aplenty. But that number in itself isn't important -- until we place it in the proper context.

Bad news ...
You and I will die one day, so all the debt we accumulate now will have to be fully extinguished before long. We'll need to become debt-free.

This isn't the case with countries, or companies for that matter. Companies like General Electric (NYSE: GE), Ford (NYSE: F), and Coca-Cola (NYSE: KO) have been in debt for perhaps more than a century, and that's fine -- because they have indefinite lifespans. They'll never become debt-free, nor should they, if only because the proper use of debt can increase their profitability. Same goes for anything with an indefinite lifespan, like countries. The raw amount of debt accumulated isn't important.

What is important is the cost of carrying that debt. Countries can remain perpetually indebted so long as interest payments don't go berserk (which they can, of course). We should really care about our debt's annual carrying cost, especially in relation to the size of our economy.  

To examine that carrying cost, I like to look at the yearly interest expense on our national debt, divided by GDP. Going back to 1940, here's what you get:

Period

Interest payments over GDP (average)

1940s

1.23%

1950s

1.28%

1960s

1.23%

1970s

1.42%

1980s

2.72%

1990s

2.91%

2000s

1.65%

Sources: Bureau of Economic Analysis, Office of Management and Budget.

Now look at these individual years:

Years

Interest payments over GDP

1945

1.40%

1964

1.24%

1984

2.83%

1986

3.05%

1991

3.25%

2000

2.24%

2010

1.29%

2011*

1.67%

2012*

2.18%

2013*

2.61%

2014*

2.90%

*Office of Management and Budget estimate.

You'll notice that 2010 is one of the least costly times for debt over the past half-century. Braving hate mail, I'll also politely point to the irony that the carrying cost of debt in the 1980s, primarily during Ronald Reagan's tenure as president, was exactly twice as costly to taxpayers as Obama's 2010 debt load. Twice. And Reagan didn't have an AIG (NYSE: AIG) to deal with.

Or how about this never-mentioned fact: The annual carrying cost of debt in 2000 -- with record surpluses and talk of eliminating the debt for good -- was 75% higher than it is today. See what happens when you put debt into context?

What's going on here?
It's all about interest rates.

We're undoubtedly loading up ridiculous sums of debt today. But interest rates are about as low as they've ever been. So the incremental cost of this debt is minimal, if not negligible. At the start of 2000, the 10-year Treasury note yielded more than 6%; today it yields 3.6%. That's allowed us to carry far more debt than we could in years past.

The problem is what happens if (or when) the tide turns and interest rates surge. Short-term interest rates, now juicing the profits of Goldman Sachs (NYSE: GS), Bank of America (NYSE: BAC), and Wells Fargo (NYSE: WFC), will someday be magnitudes higher than they are today. That's a near certainty. Moreover, the big debt accumulation period really begins 10, 20, and 30 years down the road, when Medicare's wheels completely fall off.

But is there a debt crisis today, or even over the next several years? The answer is unequivocally "no." Quite the opposite. In fact, the debt's current cost to taxpayers is about as low as it's been in decades. And if the use of deficit spending allows the U.S. to get its economy really moving again, then the tax base will expand, meaning tax revenue will increase, and thus the annual deficit should decline.

Decades down the road, the debt situation gets unimaginably scary. But for now, this is really an arsenic issue.

Fool contributor Morgan Housel doesn't own shares in any of the companies mentioned in this article. Coca-Cola is a selection of Motley Fool Inside Value and Motley Fool Income Investor. Ford is a Stock Advisor selection. The Fool's disclosure policy keeps calm and carries on.