Rising National Debt Increases Costs for American Families and Businesses
One of the economically damaging effects of the rapidly rising national debt is the fact that it contributes to higher inflation and interest rates. But what does that mean, practically speaking, for American families and businesses?
A new report from the nonpartisan Budget Lab at Yale assesses the impact of the rising debt on affordability and the cost of living.
Yale’s report finds:
- Federal fiscal policy is a significant but often overlooked factor in the affordability of vehicles, homes, and small business loans.
- Legislative changes since 2015 have cumulatively raised the latest 10-year debt-to-gross domestic product projection by 49 percentage points.
- Consequently, long-term Treasury yields have increased by approximately 1 percentage point since 2015, translating into larger borrowing costs for Americans. On average:
- Mortgage interest payments are higher by $2,534 per year, or $76,014 over the life of a 30-year loan.
- Small business loan payments are higher by $772 annually, or $7,723 over the life of a 10-year loan.
- Auto loan payments are higher by $117 annually, or $670 over the life of a 5¾-year loan.
As part of the report, the Budget Lab at Yale also released a companion Deficits and Affordability Tool, which calculates how much federal deficits are costing Americans personally on their loans.
This new report makes clear how the rising national debt comes at a real cost to Americans. Stabilizing the debt is a key component of improving the cost of living and building a stronger, more sustainable future for the country.
Further Reading
The Rising National Debt Means Fewer Jobs, Lower Wages for Young People
The national debt is growing faster than ever, and the consequences for the job market are serious.
The National Debt Can Crowd Out Investments in the Economy — Here’s How
Large amounts of federal debt could “crowd out” investments by the private sector, making the economy less productive and stunting wage growth.
The Fed Held Its Target Range For the Fourth Meeting in a Row but Interest Costs Remain High
High interest rates on U.S. Treasury securities increase the federal government’s borrowing costs.