The national debt is projected to climb rapidly over the next several years, and higher interest rates could make the nation’s fiscal outlook even worse. The Congressional Budget Office (CBO) released long-term projections in March, showing that debt held by the public would climb from 99 percent of gross domestic product (GDP) in 2024 to 166 percent in 2054 if no changes to current law are made. Rising interest rates are a significant contributor to that growth in debt.
Interest rates on U.S. Treasury securities have a significant influence on federal borrowing costs, and therefore, on the amount of federal debt accrued. According to CBO’s projections, the average interest rate on U.S. Treasury securities could climb from 3.1 percent in 2024 to 3.8 percent in 2054. However, variations from those projections could significantly impact the amount of federal debt outstanding. To analyze…
