US Racks Up $652 Billion in Debt Costs as Rates Hit 11-Year High

[mahatmakanejeeves]

US Racks Up $652 Billion in Debt Costs as Rates Hit 11-Year High

• Higher interest rates mean bigger debt servicing costs
• US budget gap widens 170% in first nine months of year

By Viktoria Dendrinou
July 13, 2023 at 2:00 PM EDT
Updated on July 13, 2023 at 4:24 PM EDT

The cost of servicing US government debt jumped by 25% in the first nine months of the fiscal year, reaching $652 billion and contributing to a major widening in the budget deficit.

For the nine months through June, the federal deficit hit $1.39 trillion, up some 170% from the same period the year before, according to Treasury Department data released on Thursday.

The widening shortfall may play into Republican lawmakers’ pressure to curtail federal spending. While the GOP, which controls the House, did a deal with the Biden administration to suspend the debt limit earlier this summer, a fresh fight looms over appropriations for the 2024 fiscal year, which starts Oct. 1.

Higher interest rates have been a key driver of the deficit, with the Federal Reserve boosting its benchmark rate by 5 percentage points since it began hiking in March last year. Five-year Treasury yields are now about 3.96%, versus 1.35% at the start of last year. As lower-yielding securities mature, the Treasury faces steady increases in the rates it pays on outstanding debt.

{snip}

[progree]

1. That's a 2.7 fold increase in the deficit (for the 9 months ending June 30 vs. same period a year

ago)

For the nine months through June, the federal deficit hit $1.39 trillion, up some 170% from the same period the year before,

And it's being financed at ever higher interest rates, e.g.

Five-year Treasury yields are now about 3.96%, versus 1.35% at the start of last year.

[SWBTATTReg]

2. And how much of this debt being paid out to American holders of this debt? My Mom and Dad have

complained over the years how low the interest rates on their CDs and other govt obligations were so low, so perhaps now, our seniors are making a little more money for their pocketbooks than in prior years, which means more spending in this economy, and in theory, more robust dividends too, being paid by stocks to compete for investor dollars.

The artificially low interest rates (artificially low, IMHO) will perhaps now reflect more reasonable rates for the cost of borrowing money, and perhaps help dampen government demand for borrowing. It would help if the tRUMP tax cuts, not paid for, either get paid for or rescinded.

[mahatmakanejeeves]

3. Yields are up.

Mon Jun 12, 2023: Yield-Hungry Investors Are Feasting on T-Bills

[SWBTATTReg]

5. Thanks! I'm sure those that their funds that invest in such investments are happy! It has

been an awful long time that paid out interest rates have been so low.

Even the housing market is showing the impact of the formerly low interest rates. Folks are staying in their homes longer because the interest rates that they are paying on their mortgages are so low, thus they don't want to lose these low rate mortgages (and I don't blame them).

It's a good time for some to perhaps buy a home, until the home price has escalated in step w/ the lowering of interest rates, which I don't think is happening, rather, the opposite is happening, home prices in many areas of the country have been dropping.

[jimfields33]

4. Trump tax cuts are done in 2025.

We go back to the old standard deduction and income tax levels. That’s going to add a lot to the treasury.

[SWBTATTReg]

6. Thanks for the FYI!

[progree]

7. The personal income tax parts. But the corporate tax changes are permanent.

And actually some provisions of the personal income tax changes are permanent too.

I suspect that just like Obama and most Dems (along with all or nearly all Repukes) made the Bush tax cuts permanent, the same will occur with the Trump tax cuts. It's just not realistic to expect Congress and whoever is president in 2025 to let personal income taxes jump at the beginning of 2026.

[peppertree]

9. +1

That part never seems to bother Cheeto's working and middle-class "economic concerns" voters.

Maybe - just maybe - because it wasn't anything economic they were concerned about all.

[MichMan]

8. Lowering the standard deduction is going to cause tax increases for a significant number of people

Last edited Fri Jul 14, 2023, 05:51 PM - Edit history (2)

Many of them lower income, or young adults, and seniors, few whom itemize