By Davide Barbuscia
NEW YORK (Reuters) – Higher debt payments and the possibility of a U.S. recession over the next 10 years could boost U.S. debt levels beyond recent forecasts and weigh on economic growth, an analyst at investment firm DoubleLine said.
The U.S. government has expanded deficit spending during economic downturns over the past century, but since 2016 deficits have increased despite continued economic expansion and low unemployment, said Ryan Kimmel, a macro asset allocation analyst at DoubleLine. This raises the risk of deeper debt-funded deficits in case of an economic contraction, he said.
“There’s finite demand for available capital out there to fund government debt issuance, and the only way you’re going to entice demand for government bonds is through higher rates,” Kimmel said. “Your interest expense goes up, which requires higher taxes, which then crimps economic growth, which again feeds through…
