#USNationalDebt

What are the long-term risks of rising interest rates on national debt

## Long-Term Risks of Rising Interest Rates on National Debt

- **Higher Debt Servicing Costs:** As interest rates rise, the government must spend more on interest payments, which can crowd out other essential spending and increase deficits.

- **Reduced Economic Growth:** Elevated debt and interest payments can reduce capital available for private investment, slowing economic growth and productivity.

- **Fiscal Crisis Risk:** Persistent high interest rates and debt levels increase the risk of a fiscal crisis, where investors may lose confidence in the government's ability to repay, leading to a spike in borrowing costs or difficulty refinancing debt.

- **Less Fiscal Flexibility:** High debt and interest costs limit the government's ability to respond to emergencies or invest in priorities like infrastructure, healthcare, or defense.

- **Financial Stability Threats:** Rising rates can stress the financial sector, especially if banks hold large amounts of government debt, making them vulnerable to government fiscal problems.

- **Living Standards Impact:** Over time, unchecked debt and rising rates can lower living standards by reducing household purchasing power and increasing borrowing costs for consumers and businesses.

These risks underscore the importance of prudent fiscal management to ensure long-term economic stability.