The United States has a national debt of $31.6 trillion, which translates to over $290,000 per household. This debt has immediate consequences for American families, primarily through rising interest rates that increase borrowing costs. The Budget Lab at Yale estimates that spending decisions since 2015 have raised Treasury yields by nearly one percentage point, resulting in an additional $2,500 per year in mortgage costs for new buyers at last year's median home price. Other loans, such as auto and small-business loans, have also seen increased costs due to government borrowing.
Despite the rising costs, there is little political will to reduce federal deficits, which could help lower prices. Historical data shows that in the 1990s, efforts to cut spending and increase revenue reduced borrowing costs for families. Recent legislation, including the Fiscal Responsibility Act of 2023, has attempted to address the deficit, but most policies have involved increased spending.
The ongoing costs of government spending are compounded by the need for the U.S. government to borrow funds, which drives up interest rates for all borrowers. Economists generally support deficit spending during crises, but the U.S. has been spending beyond its means for over two decades. Potential solutions to address the deficit include higher taxes and spending cuts, which are often politically unpopular. The challenge remains for lawmakers to balance the need for fiscal responsibility with the immediate costs that affect voters.