![]() Bureau of Labor Statistics.īut opponents to the wage hikes say they can be detrimental to small businesses, which already took a major hit during the coronavirus pandemic.Ĭindy Lee, the owner of a bowling alley in Endicott, New York, said she’s struggling to pay off loans taken out during the pandemic that kept her business afloat. Inflation has meant that something that cost $15 in 2012 - when labor activists adopted the “Fight for $15” slogan in a push for wage hikes - would probably cost almost $20 today, according to the U.S. It is vital for lawmakers to take action on the growing debt to ensure a stable economic future.New York, California and Massachusetts are among states where pro-labor forces are now pushing proposals that, if approved, would boost minimum wages to $20 or more in the coming years. Congresses and Presidents of both parties, over many years, have avoided making hard choices about our budget and failed to put it on a sustainable path. Furthermore, as interest rates rise and the nation’s debt grows, it will become even more expensive to borrow in the future. Significant borrowing was necessary to respond to the COVID-19 pandemic however, the structural imbalance between spending and revenues that existed before the pandemic is still large and will grow rapidly in the future. The long-term fiscal challenges facing the United States are serious. CBO estimates that by 2053, interest costs are projected to be nearly three times what the federal government has historically spent on R&D, nondefense infrastructure, and education, combined. Interest costs would also become the largest “program” over the next few decades - surpassing defense spending in 2029, Medicare in 2044, and Social Security in 2050.īallooning interest costs threaten to crowd out important public investments that can fuel economic growth in the future. ![]() According to CBO’s projections, interest payments would total around $74 trillion over the next 30 years and would take up nearly 40 percent of all federal revenues by 2053. The growth in interest costs presents a significant challenge in the long-term as well. However, if inflation is higher than CBO’s projections and if the Fed raises interest rates by larger amounts than the agency projected, such costs may rise even faster than anticipated. In February, the Congressional Budget Office (CBO) projected that annual net interest costs would total $640 billion in 2023 and double over the upcoming decade, soaring from $739 billion in 2024 to $1.4 trillion in 2033 and summing to $10.5 trillion over that period. Expectations about short-term rates and inflation have already pushed up longer-term rates as well. However, as the Federal Reserve increases the federal funds rate, short-term rates on Treasury securities will rise as well - making some federal borrowing more expensive. ![]() The United States was able to borrow cheaply to respond to the pandemic because interest rates were historically low. Treasury securities rise, so too will the federal government’s borrowing costs. ![]() Expectations about the short-term rates, combined with other factors, may also affect longer-term rates that are applied to business investment loans and consumer borrowing such as mortgages and car loans. Adjusting the rate is an important tool for the Federal Reserve to help achieve their statutory mandate, which is to promote the goals of maximum employment, stable prices, and moderate long-term interest rates. The federal funds rate is the benchmark for Treasury bills and other short-term securities. It reflects the second time the central bank has raised rates this year (following seven raises in 2022 after holding them close to zero since the onset of the pandemic). The Fed’s move will set the target range for the federal funds rate to between 4.75 and 5.0 percent - a 16-year high. The increase in that rate, which is the interest rate at which commercial banks lend to one another overnight, is meant to help tame rising inflation however, the increase also has implications for the federal government’s borrowing costs and therefore the nation’s fiscal picture. Today, the Federal Reserve announced a 0.25 percentage point increase in the target for the federal funds rate.
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