February 06, 2013
Currently net interest rate payments are 1.4 percent of GDP. The Congressional Budget Office (CBO) projects this will rise to 3.3 percent of GDP by 2023. This 1.9 percentage point rise in projected interest payments is by far the largest cause of projected increases in deficits over the decade. In addition, the interest refunded from the Fed to the Treasury is projected to fall by 0.3 percentage points, meaning that higher interest costs are projected to add a total of 2.2 percentage points to the deficit.
This rise is noteworthy because it is almost entirely due to higher interest rates rather than large debt, since the debt to GDP ratio is projected to be only marginally higher in 2023 than it is today. The projection of higher interest rates is in turn a projection about Federal Reserve Board policy. In other words, CBO projects that the Fed’s decision to raise interest rates over the next decade will be the main factor pushing deficits higher.
The Post somehow missed this one.
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