Rising Interest Rates May Blow Up the Federal Budget

As the chart below shows, even dramatically rising federal debt in recent years did not much hike Congress's debt service burden.

As Nick Giambruno explains, our forty-year experiment in relentlessly lower interest rates may soon end regardless of what the Fed does.

Inflation, huge projected deficits, economic sanctions on Russia, oil disruptions, and a diminished appetite around the world for propping up Uncle Sam forever all exert upward pressure on Treasury rates.

Even if we laughably assume total federal debt remains static at around $23.8 trillion, interest rates of merely 2 or 3 percent will cause interest expense to rise considerably.

Rates of 10 percent-hardly unthinkable, given the Paul Volcker era of the late seventies and early eighties-would cause debt service to explode to over $2.3 trillion.

Interest on debt in the hands of the public at different interest rates.

At some point, given the sheer and utter profligacy of Congress, will the world demand junk bond rates to loan America another dime? Everyone knows the US will never pay its debts except nominally through inflation; everyone knows off-balance sheet entitlement promises cannot be kept in any meaningful way.
 

https://mises.org/wire/rising-interest-rates-may-blow-federal-budget