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
What Is Stagflation, and How Would It Affect the National Debt?
Stagflation is rare, but when it does happen, it can have significant negative consequences for the economy and the national debt.
What Are Interest Costs on the National Debt?
Interest costs are on track to become the largest category of spending in the federal budget.
Fed Raises Rates for First Time Since 2023 as Interest Costs Top $1 Trillion
High interest rates on U.S. Treasury securities increase the federal government’s borrowing costs.