Policy Backgrounders
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Navigating the Economic Storm

Policy Backgrounders

CED’s Policy Backgrounders provide timely insights on prominent business and economic policy issues facing the nation.

Record Debt Servicing Costs Weigh on US Fiscal Outlook

December 08, 2023

New analysis shows that annualized gross interest payments on US debt reached $1 trillion at the end of October, doubling over the previous 19 months.

  • The estimates annualize current costs of servicing debt, driven by rising outstanding debt balance and higher average interest rates paid by the Treasury as more debt is issued into today’s higher rate environment.
  • Interest costs are projected to increasingly strain the US budget if unaddressed, with CBO estimating that net interest costs will increase from 2.4% of GDP in FY2023 to 3.7% and 6.7% by 2033 and 2053, respectively.
  • The US Treasury’s increasing debt issuance to keep pace with surging deficits comes at the same time as interest rates on federal debt reach their highest levels since the global financial crisis and as the market composition for Treasuries is changing. This threatens to crowd out private investment by diverting investment dollars away from the private sector and toward US Treasury bonds, which are used to finance existing obligations of the government, not new private-sector initiatives.

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Authors

Dr. Lori Esposito Murray

Dr. Lori Esposito Murray

Senior Fellow for National Security & Managing Director of CEO Programs

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Mitchell Barnes

Mitchell Barnes

Economist

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