Back to posts

Crushing Interest Burden?

April 18, 2024 | Posted in: Insights

U.S. Government debt actually shrank in the fiscal year ending in 2000 but it has grown at an 8% annual rate since that time reaching the current level of $34 trillion. Combing that growth with the increase in the average interest rate on government debt from 1.56% in January of 2022 to 3.22% in March of this year, you get the following ugly picture of the government’s interest burden.

The Congressional Budget Office reports that interest on the debt exceeded defense spending for the first time in 2023. Of course, the great unknown is whether and when the interest burden become unmanageable. Some economists, politicians, and pundits have been sounding the alarm since the curve steepened in the early 1980’s, and there have been recent statements of concern by FED Chair Jerome Powell and the International Monetary Fund. However, the 1980-2024 period has generally been characterized by strong economic growth and booming capital markets. So, regardless of whether we should be concerned or not, this graph is nevertheless quite striking.