Borrowing to finance that deficit-at a time when interest rates are expected to rise-would cause net interest payments as a percentage of GDP to increase over that period, from 1.4 percent to 2.2 percent, which is generally in line with the 50-year average of 2.0 percent. In CBO’s most recent projections, the cumulative deficit from 2021 through 2030 totals nearly $13 trillion. In fiscal year 2020, net outlays for interest totaled $345 billion, equal to 1.6 percent of GDP and 5.3 percent of total federal spending. Net outlays for interest largely depend on interest rates and the amount of debt that the Treasury issues to the public. Some of those payments and receipts are intragovernmental transactions on accounts that are not related to the public debt and have no effect on the overall federal budget. In the federal budget, the category of spending called net interest comprises the government’s interest payments on debt held by the public, offset by certain types of interest income that the government receives. In this report, the Congressional Budget Office describes federal net interest outlays and their projected growth over the coming decade: Over the same period, that debt has increased by nearly 65 percent relative to GDP. Historically low interest rates have held down that growth, compared with growth in debt held by the public. Over the past 10 years, the federal government’s net interest costs have grown by about 25 percent relative to the size of the economy as represented by gross domestic product (GDP). Net Interest Outlays Under Various Interest Rate Scenarios CBO’s Projections of Net Interest Outlays, Debt, and Interest Rates, 2020 to 2030 The Budgetary Treatment of Federal Credit Programs With Positive Subsidy Costs Net Interest Outlays, Debt, and Interest Rates, 1970 to 2020 Alternative Scenarios for Net Interest Outlays CBO’s Baseline Projections of Net Interest Outlays Chapter 2: Net Interest in CBO’s Projections.The Effects of Declining Interest Rates.Chapter 1: Net Interest in the Federal Budget.What Are CBO’s Projections of Net Interest?.
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