Debt

People often express concern about the national debt which is now just over $30 trillion. The borrowing rate for the US has been low because the Fed has kept interest rates low. For example the government paid on 1.5% on the debt last year which was $450 billion dollars. While home loans and car loans are often talked about when the Fed raises the funds rate it also effects the government interest on debt. If the Fed increases the rate by one percent which they are planning to do this month that equates to an additional $300 billion dollars added to the national debt. The Fed will keep increasing the rates until it tames inflation and that may mean going to 8% which means another $2.4 trillion and that is each year. That is more than twice what is currently spent on social security.