What should matter is that the consequences of this debt are not off in the future, but already here. The government’s deficits have saddled many American families with higher costs, largely from rising interest rates. The Budget Lab, the policy research center at Yale where I am the executive director, recently estimated that congressional-spending decisions since 2015 have raised Treasury yields by almost a full percentage point, which affects what American households pay to borrow. For someone taking out a 30-year mortgage at last year’s median home price, this rise in long-term interest rates has increased their borrowing costs by about $2,500 a year, or roughly $76,000 over the life of the loan. (The Budget Lab has built a tool to help users calculate their own extra mortgage costs.)
The problem is not just for Americans who are lucky enough to buy a home. The bloated government budgets and waning federal revenues of the past decade are driving up costs across the board. Compared with a world in which these fiscal-policy changes did not take place, the annual borrowing costs on a typical auto loan are now up by about $120, and by about $770 on a typical small-business loan. Credit-card borrowing rates are also hovering near record highs.
Although affordability has become a watchword for politicians who understand that rising prices are hurting American families, lawmakers seem to have forgotten that reducing federal deficits would help bring down prices. In the 1990s, Congress and the White House prioritized bringing deficits down by both cutting spending and raising revenue—moves that lowered borrowing costs for American families by about 0.6 percentage points, according to Budget Lab calculations. But few lawmakers seem to be suggesting the spending cuts and tax increases necessary to lower costs now.
...
Politicians respond to electoral consequences. Right now there is nothing stopping them from doling out tax cuts and spending promises while also driving up interest rates. Voters may complain that their lives are becoming unaffordable, but hardly anyone seems to appreciate that federal deficits are partly to blame. If we want to see lawmakers actually address this problem, economists need to do a better job explaining the stakes. This means that instead of talking about the fact that our national debt could fill all 32 NFL stadiums with two tiers of construction pallets filled with $100 bills, we should be talking about how deficit spending is making it harder to pay our own bills.
