What they aren't saying about the Fed's interest rate increase... but should

[MadDog]

As more and more members of the media discuss the impact of the pending increase in the Fed's interest rate, there is one serious impact they haven't discussed so far, and that's the impact on the interest paid by the Federal Government itself.

This year the US govt will spend about $400 billion on interest on the national debt. Not a dollar of this money goes anything that provides services, benefits, or anything else of value. And though the Fed rate is not the same rate that the US govt pays on its debt, any change in the Fed rate is ultimately affects the rate our govt must pay on its debt.

The sad fact is that in the hay days of the Clinton administration, the interest rate paid by the US government was more than 2.5 times what it is now. Imagine what the govt would be paying if we had that interest rate today. Yes, the payment of interest alone would be over $1 trillion a year, and once again, not a single dollar of that would be going to services or benefits.

Has anyone really given serious thought to what the future increases in interest rates will mean to the cost of our government?

 

[Toddsterpatriot]

Sounds like a good reason to cut spending, a lot.

 

[saveliberty]

Yes I have given thought to debt service. I also have given thought to the Feds concerns about inflation, yet the governments tells us no SS increase, because there is no inflation this year.

 

[TooTall]

Yes I have given thought to debt service. I also have given thought to the Feds concerns about inflation, yet the governments tells us no SS increase, because there is no inflation this year.

I read somewhere that inflation was a mere 1.3% and the growth rate was 2%. I also read that either the Administration or the Federal Reserve said a 2.5% growth rate would be sufficient to indicate the economy was in recovery. I don't trust my memory and will welcome any corrections, but perhaps the Democrat appointed Chair of the Federal Reserve decided to give Hillary a premature boost before the election.

And, I agree 100% that boosting the interest rate will be disastrous for the US, although 1/4% is not going to create an immediate problem.

 

[MadDog]

And, I agree 100% that boosting the interest rate will be disastrous for the US, although 1/4% is not going to create an immediate problem.

With even a 1/4 percentage point increase, the rate paid by the govt would go from 2.4% to 2.65%, which means a 10% increase in the amount that has to be paid. Now imagine a full percentage point increase envisioned for the next 9 months. That would mean a 40% increase in the amount of interest that has to be paid - taking it from $400 billion per year to $640 billion per year.