Re:Fed Ends Zero-Rate Era
by SilasX on Wednesday December 16, 2015 @03:45PM
(#10747176)
But it would seem like a 2% rate would still have pretty bad consequences. The average interest rate on federal debt is 2.4%. [2], and interest on that debt is about 7 percent of outlays. [1] (Yes, I looked up those figures for my previous HN comment, not trying to plagiarize myself.)
I couldn't find data on average maturity, but if it's slanted toward shor-term debt, then that average could go to more like ~3.5%, which would be a ~40% increase in interest spending, and (assuming no increase in revenues) a 3-4% cut from the federal budget, when pretty much anything is hard to cut.
Debt at these low interest rates makes spending very vulnerable to even small (point-wise) increases.
I couldn't find data on average maturity, but if it's slanted toward shor-term debt, then that average could go to more like ~3.5%, which would be a ~40% increase in interest spending, and (assuming no increase in revenues) a 3-4% cut from the federal budget, when pretty much anything is hard to cut.
Debt at these low interest rates makes spending very vulnerable to even small (point-wise) increases.
[1] http://www.cbpp.org/research/policy-basics-where-do-our-fede....
[2] http://www.pewresearch.org/files/2013/10/debt_interest1.png http://www.pewresearch.org/files/2013/10/debt_interest1.png