Washington’s politicians are fairly blasé about the national debt. After all, the interest payments to the debt are not significantly different than they have been over the last 40 years. However, what is not being communicated to the public is that the Federal Reserve must raise rates substantially over the coming years. If interest payments even begin to approach historical levels, federal revenues simply won’t be enough to pay the interest.
Currently the United States is projected to pay around $333B next year in interest on the national debt: half of what we pay on national defense. However, this amount is only as low as it is because of a bit of trickery known as “quantitative easing,” wherein the Federal Reserve has been able to finagle unprecedentedly low interest rates since the last financial crash in 2008. According to the Congressional Budget Office, the interest rate on debt has been hovering at between 1.5-2.5% since that time. In order to pull this off, the Fed kept rates at 0.25% from December 2008 until December 2016! Currently the Fed has the rate set at 1.25%. However, historically, the interest rate has been much higher. Since 1980, the interest rate …
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