Federal Interest Payments to Soar

One very important detail that is often glossed over in the ongoing debate about the unsustainability of the current federal deficit and debt is the amount of interest payments paid by the federal government as compared to other periods. In short, the interest paid today has been favorably impacted by low interest rates, which obviously will not always been the case and likely will reverse in a negative way in the next few years. An excellent article, well worth reading in full, by Michael Pollaro explores this point:

"It’s not talked about much, at least by mainstream analysts, but make no mistake, it’s a time bomb, locked and loaded, and it’s set to blow the U.S. government’s budget sky high.

That time bomb? The interest cost on the government’s debt.

And what you ask will light the fuse? The end of the 30-year bull market in U.S. government debt, the end of record low interest rates."

Mr. Pollaro makes the compelling point that the cost of interest will likely soar in the coming years, making the federal debt and deficit that much more unmanageable.

Now is the time for politicians to get the spiraling budget mess under control before even more damage is done to the US economy.