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Commentary By Brian Riedl

Interest Payments Are a Ticking Time Bomb

Economics Finance, Tax & Budget

Massive federal borrowing means gambling America’s economic future on interest rates never rising.

Lawmakers and economics commentators have spent years promising that low interest rates make runaway borrowing and debt a “free lunch” for governments. They were wrong about the sustainability of soaring debt and interest rates—and now the bill is coming due. 

Washington’s interest costs have doubled since 2015, from 1.2 to 2.5 percent of the economy, according to new estimates from the Congressional Budget Office (CBO). At $663 billion, this year’s interest costs are up 40 percent over last year. That bill is now projected to exceed defense spending within five years, set spending records as a share of the economy within eight years, and become the largest federal program within three decades—exceeding Social Security and Medicare. At that point, interest costs will consume more than one-third of all federal taxes.

Continue reading the entire piece here at The Dispatch (paywall)


Brian M. Riedl is a senior fellow at the Manhattan Institute. Follow him on Twitter here

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