For 2012, the White House expects the economy will grow at a 3.6 percent annual rate (after inflation), though economists expect the economy to grow by 3.3 percent, according to the Blue Chip Economic Indicators.
At the same time, OMB estimates the annual average interest rate on the 10-year Treasury bill will be 3.6 percent in 2012.
“If the economy grows by 3.6 percent, interest rates will be higher,” says Nigel Gault, chief economist at IHS Global Insight in Lexington, Mass.
How much higher? Above 4 percent, Mr. Gault estimates.
Higher interest rates will matter: as the national debt – now at $15.4 trillion – swells, so will interest payments.
In 2010, interest represented 5.7 percent of federal spending. By 2021, when OMB estimates the national debt will be $26.3 trillion, interest payments will represent 14.8 percent of the budget.
“It’s going to be a huge burden,” says Gault.
