Record U.S. Debt, But Interest Costs Are In Line with History
As U.S. debt hits $40 trillion and continues to rise, the sheer size of the number makes for striking headlines, but alone doesn’t tell the whole story.
A more useful measure may be the cost of servicing that debt relative to the size of the federal budget and the economy.
Unlike a household, the U.S. has a growing economy and tax base, can refinance its debt over time, and issues debt in its own currency.
Today, federal interest payments account for 16.1% of federal spending, only modestly above the 15.0% long-term average since 1947.
When economic growth keeps pace with borrowing costs, a rising debt burden can remain manageable over time.
Although the spending trend deserves attention, history suggests its sustainability may be more resilient than the headline numbers imply.
Record U.S. Debt, But Interest Costs Are In Line with History
As U.S. debt hits $40 trillion and continues to rise, the sheer size of the number makes for striking headlines, but alone doesn’t tell the whole story.
A more useful measure may be the cost of servicing that debt relative to the size of the federal budget and the economy.
Unlike a household, the U.S. has a growing economy and tax base, can refinance its debt over time, and issues debt in its own currency.
Today, federal interest payments account for 16.1% of federal spending, only modestly above the 15.0% long-term average since 1947.
When economic growth keeps pace with borrowing costs, a rising debt burden can remain manageable over time.
Although the spending trend deserves attention, history suggests its sustainability may be more resilient than the headline numbers imply.