A one percentage point increase in interest rates translates into a $30 trillion increase in interest costs on the national debt.
The optimistic scenario goes like this. America shakes off what remains of the pandemic in the coming months without the need for trillions in additional borrowing, Congress doesn’t pass any more deficit-busting spending plans while also allowing the 2017 tax cuts to expire in 2025 as planned, and the economy performs consistently well for the next, oh, three decades as we dodge recessions, wars, climate issues, and anything else the world might throw our way.
Under that set of circumstances, the national debt will merely be twice the size of the entire U.S. economy by the middle of this century.
If the last two years have taught us anything, of course, it’s that crises can appear with little warning. The federal government was already more than $23 trillion in debt in early 2020, but it has borrowed about $6 trillion more since then—much of it to fund pandemic-era stimulus bills. Pandemic-era debt isn’t the main cause of the debt tsunami that’s threatening to wash over the government in the next few decades—Social Security, Medicare, Medicaid, and decades of spending more than the government takes in are the real culprits—but so much borrowing in so short a period of time has heightened the stakes.
Categories: Economics/Class Relations