Goldman Sachs: US interest cost to surge on rising yields, deficit - BBG

Analysis General

Published: 2/19/2018 2:17:00 AM

Goldman Sachs’ analysts including Alec Phillips in Washington wrote it’s the latest note to clients, the cost of servicing American debt is expected to surge, in response to a historic expansion in the US borrowing during a period of economic growth, alongside rising bond yields, Bloomberg reports.

Key Quotes:

“Federal fiscal policy is entering uncharted territory.”

“In the past, as the economy strengthens and the debt burden increases, Congress has responded by raising taxes and cutting spending. This time around, the opposite has occurred.”

If current fiscal policies are extended, the Goldman analysts predict that the US net interest expense relative to GDP will exceed the levels seen in the 1980s and early 1990s by 2027. And debt-to-GDP will probably be higher than 100 percent, “putting the U.S. in a worse fiscal position than the experience of the 1940s or 1990s.”

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