With rising rates and rising debt, the taxpayer bill is finally coming due

That would bring the total interest cost in 2023 to roughly the same level as the federal government’s 2022 budget for Medicaid.

The increase is caused partly by the U.S. government’s rapidly increasing national debt, as well as by the Federal Reserve sharply increasing interest rates to hold down inflation. The government has more than $31 trillion in debt and ran a $1.4 trillion deficit in fiscal 2022 (a figure that represents the gap between spending and revenue).

These high interest costs in the current fiscal year are just the beginning. Those costs will continue growing rapidly, which will increase the burden for future generations.

The Congressional Budget Office’s interest-cost projections, issued in May, predicted a rise of $43 billion in interest costs for fiscal year 2023 compared with 2022. Fiscal year 2023 began on Oct. 1.

But after adjusting for the sharply higher interest rates that the Federal Reserve has imposed since May — and assuming that the Fed will keep its word and impose additional increases later this year — the interest-cost numbers are staggering.

With help from Marc Goldwein, the senior policy director of the Committee for a Responsible Federal Budget, I’ve used a workbook function on the CBO’s website to estimate the added cost of interest rates higher than the CBO projected in May.

The 30-day Treasury interest rate this week was more than 2.5 percent higher than on May 2, the one-year rate was more than 2 percent higher, and the 10-year rate was almost 1 percent higher. And the Fed says that higher rates are coming later this year.

Let’s assume the Treasury’s borrowing cost will be 1.5 percent above CBO’s predictions for this fiscal year as well as for the next nine years.

For the current year, projected higher interest costs could work out to about $137 billion.

The interest numbers keep growing and growing. For fiscal 2024, we’re looking at a $719 billion interest cost if you include my $194 billion estimate for higher rates.

The Fed, which admittedly got a late start battling inflation, is now doing its job as best it can and is trying to tamp down price increases with higher interest rates; the higher interest costs for the Treasury are collateral damage.

As for the CBO, it had no way of knowing in May that the Fed would raise interest rates so much so rapidly. Unlike a securities trader, the CBO isn’t in the business of modifying its math every time the financial markets have a hiccup, and hasn’t updated its May numbers. But when the next update comes, which typically happens in January, the interest numbers may well be high enough to knock your socks…