Growing national debt can drive up interest rates throughout the economy, leading to higher interest payments on mortgages, car loans, student loans, and credit card debt.
Although rates are currently low – due mainly to the weak economy and temporary efforts by the Federal Reserve to keep them down – they will most certainly rise as the economy recovers, and they will rise much higher if debt continues to grow.
Reducing the debt will help lower costs for middle-class families. Growing debt levels, on the other hand, will increase interest costs, squeeze family budgets, and put important family investments out of reach. In 25 years, interest rates would be 1 point higher because of debt.[2] Put another way, a family with a $300,000 mortgage can expect to pay at least $60,000 more over the course of the mortgage.
Less Room for Investment in Infrastructure, Research, and the Next Generation
Growing national debt means that the government must pay higher interest payments to service that debt. Interest will represent the fastest growing part of the federal budget. The nonpartisan Congressional Budget Office projects interest costs will more than triple from about $250 billion in 2016 to about $850 billion in ten years. By 2027, 100 percent of the revenue we collect will go toward interest payments and mandatory spending. That leaves little room for important priorities and investments such as national defense, education, infrastructure, low-income support, and basic research. As more of our budget goes to financing today’s spending and yesterday’s promises, spending targeted toward the next generation will continue to dwindle.