WASHINGTON, D.C. – In its annual report on the “The Nation’s Fiscal Health” released today by the Government Accountability Office (GAO), the agency cited among various concerns the impact of interest rates on the nation’s fiscal health – even acknowledging the risks associated with interest rates climbing to levels higher than current Congressional Budget Office (CBO) projections. GAO’s report comes on the same day that House Budget Committee Republican Leader Jason Smith (MO-08) released a report analyzing the consequences to the federal debt and the cost of financing that debt under five different interest rate scenarios – CBO’s baseline interest rate forecast (3.0 percent average); CBO’s higher interest rate scenario (3.9 percent average); the average of the past 50 years (5.7 percent); the average of the 1990s (6.9 percent); and the peak level of 1982 (10.8 percent), the last time inflation was as high as it is today.
House Budget Committee Republican Leader Smith issued the following statement on GAO’s focus on interest rates:
“GAO’s findings speak to the same growing concern highlighted in the report we released today about the role that interest rates will play in the long-term fiscal health of our nation. President Biden and Washington Democrats are showing no real interest in tamping down the reckless spending that is driving up the debt and fueling the worst inflation crisis in forty years – in response to which the Federal Reserve has stated its intent to continue raising interest rates. A future of higher interest rates presents a unique challenge as rising interest payments are both a consequence of inflationary spending policies as well as a contributor to the debt brought on by unchecked spending.”
- This week, the Federal Reserve raised interest rates by 50 basis points (0.5 percent), the second rate increase since March, to curb rising inflation caused by reckless government deficit spending
- Inflation is currently at 8.5 percent year-over-year
- Inflation has risen 10.4 percent since Joe Biden took office
- Inflation is four times above the level CBO predicted for this year
- Rising interest rates will not only increase the national debt but raise the cost of annual interest payments on the debt to unsustainable levels
- The last time inflation reached this level, interest rates were above 10 percent
- Should interest rates return to the 50-year average of 5.7 percent, federal public debt climbs to $215 trillion in 2051. Interest payments on the debt grow to $11 trillion per year by 2051
- Should interest rates return to 1982 levels of 10.8 percent, federal public debt climbs to $693 trillion in 2051. Interest payments on the debt would be projected to grow to $67 trillion per year by 2051
To read House Budget Committee Republican Leader Smith’s report “The Consequences of Higher Interest Rates to the Federal Budget,” click here or on the image below.