We’re all well aware that the Federal Government has accumulated large levels of debt over time, but how much does it actually cost to service this debt?
When the Federal debt load is the subject of so much news coverage, it’s surprising to find that far less is spent on interest today than was spent in the 80’s and 90’s.
The Federal Government spends approximately 1.6% of GDP on interest payments. This is equal to about 6% of Federal spending, or about 9% of Federal Income. What’s most interesting though, is the amount that was previously spent on servicing the Federal Governments debt. Interest payments peaked at over 17% of Federal income before there was the political will to balance the budget during the Clinton years. Of course it is important to remember that interest rates were higher in the 80’s and 90’s and they currently stand at all time lows. A rise in interest rates has the power to dramatically increase the cost of servicing U.S. Government Debt.
- economicconscience posted this