Tuesday, August 2, 2016

US Net Interest Costs To Increase From 6 Percent To 21 Percent Of Federal Spending Over Next 30 Years: CBO

From the Congressional Budget Office, "Interest Costs in The Long-Term Budget Outlook" Posted by Stephanie Barello and Michael Simpson on August 2, 2016:
The government’s net interest costs are projected to more than double as a share of the economy over the next decade—from 1.4 percent of GDP in 2016 to 3.0 percent by 2026. By 2046, if current laws governing taxes and spending generally did not change, those costs would reach 5.8 percent of GDP—increasing from 6 percent of federal spending to 21 percent over the next 30 years.

Source: Congressional Budget Office

Net interest costs are projected to increase as interest rates rise from unusually low levels and as greater federal borrowing directly leads to greater debt-service costs. In addition, greater federal borrowing is projected to put further upward pressure on interest rates and thus on interest costs. Growth in net interest costs and growth in debt reinforce each other: Rising interest costs push up deficits and debt, and rising debt pushes up interest costs.

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