Rising Interest Rates Are Accelerating America Toward an Unsustainable Fiscal Crisis
Source: Christopher Jacobs. "Interest Rates Push Washington Toward Another Fiscal Crisis." September 25, 2026. thefederalist.com
The Gist
The author argues that rising interest rates are exposing how unsustainable America's growing national debt has become, and warns that a fiscal crisis is inevitable unless Washington cuts spending soon. He suggests that both politicians and the public are unwilling to make hard choices, so the country may need a crisis to force real change—better sooner than later while the debt is 'only' $40 trillion.
Conclusion
Rising interest rates are pushing the U.S. federal government toward an unavoidable fiscal crisis, and Washington must act now to rein in deficits before that crisis forces painful adjustments.
Premises
- Long-term interest rates (10-year Treasury at 5%) have already exceeded CBO's decade-long projections, which assumed rates of 4.1-4.4%.
- Interest rates above projections could add trillions of dollars in additional debt beyond already bleak budget forecasts.
- If elevated rates persist, within a decade the U.S. will spend more on debt interest than on Medicare or Social Security retirement benefits.
- When interest rates exceed economic growth rates, the nation's ability to grow its way out of debt declines dramatically, increasing fiscal crisis risk.
- Current annual deficits (about 6% of GDP) are abnormally high for a non-recessionary period, indicating structural overspending.
- Neither political party shows genuine interest in addressing the deficit problem, and the American public also resists trade-offs needed for fiscal responsibility.
- Stein's Law dictates that unsustainable trends must eventually stop, meaning the current fiscal trajectory cannot continue indefinitely.
Assumptions
- Current spending and deficit trends will continue without significant policy intervention.
- A 'fiscal crisis' (default, severe austerity, or crisis-driven reform) is a worse outcome than proactively reducing deficits now.
- Rising interest rates are primarily driven by legitimate market concerns about fiscal sustainability rather than purely by other factors like AI investment or inflation.
- Political will to address deficits is necessary and currently lacking on both sides of the aisle.
- The public's stated preferences (wanting benefits without cuts or tax increases) meaningfully constrain policymakers' options.
- Waiting until debt is lower ($40 trillion vs. higher) before a crisis hits would produce better outcomes than continuing to delay.