Quick Take
- The average Federal Funds Rate from 1955-01-01 to 2023-05-17 is 4.62%. We are now in a normal regime of interest rates.
- The issue now becomes the total debt to GDP — which is roughly 120% — so as rates stay elevated, it will cost more to service the interest.
- As it becomes more expensive to service the debt, this will eat into other sectors and shrink their pie, such as health care and education, and society will break down further.
- Looking out to FY 2032. interest costs are projected to hit $1.2 trillion, which will be the largest expenditure program, surpassing Medicaid ($789 billion) and defense ($990 billion).
- The only way would be to grow GDP ahead of the debt securities and liabilities, but that looks extremely unlikely — especially with an aging population and declining population.
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