With interest rates in recent years far below traditional levels, it has been easy for American taxpayers and their political leaders to overlook one of the chief drawbacks of the federal debt: the borrowing costs.
But as Congressional Budget Office (CBO) officials have made clear recently, there is good reason for elected officials and the public to start paying more attention to what the government pays in interest -- and how rapidly these payments will rise in the coming years unless big changes are made in the federal budget.
In testimony last week on Capitol Hill, CBO Director Keith Hall said that net interest payments this year would be the fastest-growing component of the projected increase in federal spending.
If interest payments rise as projected over the next decade, they will make it even more difficult to put the federal budget on a responsible and sustainable path.
Two factors are driving the current and projected growth in federal interest costs:
Interest rates are on their way up. As explained in a CBO blog post last week, the budget office expects rates to rise...