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Monday, September 8, 2014

CBO: Climbing Interest Rate, Large Effect on Federal Debt

Federal debt held by the public will reach about $12.8 trillion by the end of this fiscal year, an amount that equals 74% of the nation’s total output (GDP) this year, according to CBO projections. If current laws remain unchanged, CBO projects that the debt will reach $20.6 trillion, or 77% of GDP in 2024.

Furthermore, with the interest rate set to rise, the interest payments on the debt will increase from $231 billion in 2014, or 1.3% of GDP, to $799 billion in 2024, or 3.0% of GDP. The rising debt accounts for some of that increase, but much of it stems from CBO’s expectation that—largely owing to the improving economy—the average interest rate paid on that debt will more than double over the next 10 years, from 1.8% in 2014 to 3.9% in 2024.

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