As Budget Gap Soars, Costs of Servicing Federal Debt Shrink

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As Budget Gap Soars, Costs of Servicing Federal Debt Shrink
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The cost of servicing the nation’s growing debt load continued to shrink through the first 11 months of the fiscal year, suggesting the U.S. still has room to borrow to fight the coronavirus pandemic

WASHINGTON—The cost of servicing the nation’s growing debt load is shrinking despite a historic rise in government red ink this year, suggesting the U.S. still has room to borrow to fightDemand for safe Treasury assets has kept interest rates near historic lows this year, pushing net interest costs down by 10% from October through August, the Treasury Department said Friday.

from the effects of the virus, which triggered business shutdowns and millions of layoffs The annual deficit nearly tripled through the first 11 months of the fiscal year, to $3 trillion from $1 trillion during the same period a year earlier. Total debt held by the public has risen to $20.8 trillion as of Wednesday, from $17.4 trillion in early March.

The nation’s widening budget gap is at the center of a debate over how much more support the economy needs to recover from the pandemic, which sent the U.S. into a recession in February. Democrats have called for another sweeping aid package, which they say is essential to help the U.S. avoid a prolonged, lackluster recovery similar to the years following the 2007-09 recession. Republicans say policy makers need to keep rising debt in check, and called for a narrower bill with targeted aid.

The Congressional Budget Office last week said debt as a share of economic output is set to approach 100% for fiscal year 2020, compared with 79.2% last year, and hit 108.9% by the end of the next decade.

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