The U.S. debt currently stands at $35.3 trillion, and the cost of paying interest on all that borrowing has risen recently and now costs less than a day The average amount is said to be $3 billion.
That includes Saturday and Sunday, he noted in a memo Tuesday.
Daily interest expenses have doubled since 2020, up from $2 billion about two years ago. It was at this time that the Fed began an aggressive interest rate hike campaign to curb inflation.
In the process, the yield paid on government bonds has increased, making the cost of repaying U.S. debt even higher. But with the Fed poised to start lowering rates later this month, the opposite could happen.
“If the Fed lowered interest rates by 1 percentage point, and the entire yield curve fell by 1 percentage point, daily interest expense would fall from $3 billion to $2.5 billion per day,” Slock estimated.
Meanwhile, the federal government’s fiscal year ends at the end of this month, but the year-to-date cost of interest payments on U.S. debt had already reached $1 trillion a few months ago.
But even if the Fed’s interest rate cuts ease the burden of interest payments, the next president is expected to worsen the budget deficit, further increasing total debt and offsetting some of the benefits of lower interest rates. .
In fact, a recent analysis by the Penn Wharton Budget Model found that deficits would widen under either President Donald Trump or Kamala Harris.
However, there is a big difference between the two.
According to President Trump’s tax and spending plan, the primary budget deficit is expected to increase by $5.8 trillion over the next 10 years on a conventional basis, and by $4.1 trillion on a dynamic basis, which includes the economic effects of fiscal policy. is.
Under the Harris administration, the primary deficit is expected to increase by $1.2 trillion on a conventional basis and $2 trillion on a dynamic basis over the next 10 years.
Still, JPMorgan analysts acknowledge that the Trump administration is likely to increase the deficit, although they say the outlook is unsustainable no matter who wins the presidential election.
“Regardless of the election outcome, the trend since the pandemic has been one of extravagant fiscal policy, which absorbs large amounts of capital and encourages additional private investment,” the bank said. “At the same time, the mass retirement of baby boomers is moving a significant proportion of the population from a high-savings period to a low-savings period in their lives, reducing the supply of capital.”
