October 4, 2022—For years, the policy wonks and heads of government departments told the public that the U.S. national debt didn’t matter because borrowing costs were so low. Now, as the Federal Reserve leads central banks in raising interest rates, the price of debt suddenly matters.
For the first time, the U.S. debt topped $31 trillion, U.S. Treasury reports. That’s up from $16 trillion in 10 years. Moreover, that figure is set to rise. For one, Congress keeps spending more than it is taking in with revenues. By August, the government ran a budget deficit of $944 billion during the first 11 months of the fiscal year, the Congressional Budget Office reported.
Here’s a look at the FY2022 budget.
Rising Costs of Deficits and Debt
Budget deficits have become the norm. The difference today is that the U.S. government now has to pay interest on that borrowed money. The Federal Reserve raised its funds rate from zero to 2.5 percent and is expected to keep increasing that. That means the U.S. debt now comes with a cost.
The Peterson Foundation estimates that interest costs are the fastest growing part of the budget. That’s saying a lot considering that other rising costs include Social Security, Medicare and Medicaid.
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