Part 8/10:
Concerns about the sustainability of this trajectory are compounded by the concept of "crowding out." Government borrowing competes with private sector investment for available capital. As the government continues to finance its deficit, higher interest rates may slow the economy by discouraging investment and consumer spending, potentially leading to increased unemployment.
Two critical questions arise: To what extent can U.S. tax revenues keep pace with growing interest payments? And at what point do rising interest costs compromise the federal budget to the extent that other vital services suffer? Interest payments already accounted for a staggering $1.1 trillion of the total 2024 budget, surpassing expenditures on Medicare and defense combined.