- The cost of servicing the US's pile of debt is on track to hit a new record in 2025, Goldman Sachs said.
- That's due to higher interest rates pushing up borrowing costs for public and private debts.
The cost of financing the US debt is about to come more expensive than ever, according to Goldman Sachs.
Strategists pointed to the rising cost of borrowing over the last year, with the Federal Reserve having raised rates to 5.25%-5.5% to lower inflation. That's pushed up the interest expenses on the US's massive debt load – which is now on pace to surpass the last peak reached in the 1990s and notch a new record by 2025, the bank estimated.
In 2022, it cost the government $476 billion, or around 2% of national GDP to pay the interest on its debt. Interest payments are set to rise to 3% of GDP in 2024, and 4% of GDP by 2030, strategists estimated.
Interest payments are also on track to become the largest category of federal spending over the next decade, according to an analysis from the Peter G. Peterson Foundation, which estimated a total $10.6 trillion will be spent paying interest on the national debt over the next 10 years.
The federal debt, meanwhile, notched $33 trillion this summer for the first time ever, reflecting a heightened level of borrowing that has economists worried.
"We estimate that debt as a share of GDP will rise from 96% to 123% over the next decade, driven primarily by a chronic deficit of around 3%," the note said.
Other estimates predict the national debt-to-GDP ratio will grow at an even faster clip. The federal debt could make up 181% of GDP by 2053, according to one projection from the Congressional Budget Office.
"Although nominal GDP growth is likely to mostly offset the effect of higher interest costs on the debt-to-GDP ratio, the structural deficit will continue to add to public debt for the foreseeable future," Goldman strategists added.