Peter G. Peterson Foundation Warns: US Government to Pay Over Half a Trillion Dollars in Interest Due to Rising Rates
According to a recent report released by the esteemed Peterson Foundation, billionaire Peter G. Peterson’s philanthropic initiative, the United States government is poised to face a significant financial challenge this year. The report highlights that the government’s interest payments on its national debt are expected to surpass half a trillion dollars.
In particular, the Peterson Foundation’s findings indicate that the US government will make a staggering $6.4 trillion in payments this year, which is a notable $81 billion higher compared to the previous year’s federal outlays.
This surge in payments can largely be attributed to the Federal Reserve’s proactive approach to interest rate hikes over the past year. Prior to the recent pause in rate adjustments, the Federal Reserve had implemented a series of ten consecutive rate hikes within a span of just 14 months, propelling its benchmark interest rate to 5.08%. Such a level has not been observed since 2007, prior to the global financial crisis.
The Peterson Foundation underscores that the US government is expected to allocate an additional $187 billion this year solely to cover the interest on its burgeoning debt. The report projects that the government’s interest payment on federal debt, primarily influenced by the size of the debt held by the public and recent interest rates, will total an alarming $663 billion (equivalent to 2.5% of GDP) in 2023. This represents a substantial 39% increase compared to the $476 billion recorded last year.
The growth in interest costs can be largely attributed to the higher interest rates, which have been raised ten times by the Federal Reserve since early 2022 in response to elevated inflationary pressures.
As of the time of writing, the US government’s national debt stands at an overwhelming $32.17 trillion. Alarmingly, projections suggest that the country’s gross national debt is expected to escalate to nearly $52 trillion within the next decade.
The Peterson Foundation’s report serves as a crucial reminder of the financial challenges facing the US government, emphasizing the urgent need for strategic measures to address the mounting debt burden and mitigate the impact of rising interest rates in the years to come.
