(Bloomberg) -- The US debt interest-cost burden climbed to the highest since the 1990s in the financial year that’s just ended, escalating the risk that...
-- The US debt interest-cost burden climbed to the highest since the 1990s in the financial year that’s just ended, escalating the risk that fiscal worries limit the policy options for the next administration in Washington.One City’s Plan to Re-Link a Neighborhood That Robert Moses Divided
While neither former President Donald Trump nor Vice President Kamala Harris has made deficit reduction a central element of their campaign, the debt issue looms over the next administration nonetheless. With Congress heading for a narrow partisan split, it could only take a handful, or potentially lone, deficit-wary legislator to stymie tax and spending plans.
The Federal Reserve’s shift to lowering rates is offering some relief to the Treasury. The weighted average interest on outstanding US debt was 3.32% at the end of September, marking the first monthly decline in nearly three years. Treasury Secretary Janet Yellen has played down concerns, saying that the key metric to track in assessing US fiscal sustainability is inflation-adjusted interest payments compared with GDP. That ratio has jumped the past year, but the White House sees it stabilizing at about 1.3% over the coming decade. Yellen has said it’s important to stay below 2%, a level seen by some as a key threshold for sustainability.
Besides the election outcome, the magnitude of Fed rate cuts will affect the fiscal outlook. While rate hikes were quickly reflected in the Treasury’s interest bill after policymakers kicked them off in March 2022, rate cuts may take more time to bring down the government’s borrowing costs. For now, investors are showing little sign of concern about US fiscal challenges, with the Fed’s easing cycle and concerns about a weakening job market continuing to support demand for Treasuries. But if and when they do, that could prove decisive for Washington, said Gary Schlossberg, global strategist at Wells Fargo Investment Institute.
White House Vice President Kamala Harris Donald Trump Social Security Wendy Edelberg Interest Costs Spending Budget Deficits Congressional Budget Office Treasury Department Biden Administration
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