US debt crisis: Interest costs reach three billion dollars per day

And that features Saturdays and Sundays, he identified in a note on Tuesday.

Daily interest expenses have doubled since 2020, from $2 trillion about two years ago, when the Federal Reserve began its campaign of aggressive rate of interest hikes to curb inflation.

As a result, servicing US debt became dearer as Treasury bonds began to yield higher. But with the Fed set to start cutting rates of interest later this month, the alternative may occur.

“If the Fed cuts interest rates by 1 percentage point and the entire yield curve falls by 1 percentage point, then daily interest expenses will fall from $3 billion per day to $2.5 billion per day,” Sløk estimated.

Meanwhile, the federal government is closing its fiscal yr at the tip of this month, and the associated fee of paying interest on U.S. debt already reached a trillion dollars months ago.

But even when the Fed’s rate cuts ease the burden of interest payments, the subsequent president is more likely to worsen budget deficits, increase debt levels and partially offset the advantages of lower rates of interest.

In fact, a recent evaluation by the Penn Wharton Budget Model found that the deficit will rise under each Donald Trump and Kamala Harris.

But there may be a giant difference between the 2.

Under Trump’s tax and spending proposals, primary deficits would rise by $5.8 trillion over the subsequent decade on a traditional basis and by $4.1 trillion on a dynamic basis, which incorporates the economic impact of fiscal policy.

Under a Harris administration, primary deficits would increase by $1.2 trillion on a traditional basis and by $2 trillion on a dynamic basis over the subsequent ten years.

Nevertheless, JPMorgan analysts described this outlook as untenable no matter who wins the presidential election, but at the identical time acknowledged that higher deficits are to be expected under Trump.

“Regardless of the election outcome, the trend since the pandemic has been one of profligate fiscal policy, absorbing significant amounts of capital and encouraging additional private investment,” the bank said. “At the same time, the mass retirement of baby boomers is shifting a significant part of the population from a high-saving phase of life to a low-saving phase, depressing the supply of capital.”