The U.S. Government is in serious trouble when interest rates rise. As interest rates rise, so will the amount of money the U.S. Government will have to pay out to service its rapidly rising debt. Unfortunately, interest rates don’t have to increase all that much for the government’s interest expense to double.
According to the TreasuryDirect.gov website, which came back online after being down for nearly a month, reported that the average interest rate paid on U.S. Treasury Securities increased from 2.2% in November 2016 to 2.3% in December 2017. While this does not seem like a significant change, every increase of 0.1% in the average interest rate, the U.S. Government has to pay an additional $20.5 billion in interest expense (based on the $20.5 trillion in total U.S. debt).
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