A Century of Interest Payments

Chart 5: Interest on Government Debt 1900-2015
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The real risk from government debt is the burden of interest payments. Experts say that when interest payments reach about 12% of GDP then a government will likely default on its debt. Chart 5 shows that the US is a long way from that risk. The peak period for government interest payments, including federal, state, and local governments, was in the 1980s, when interest rates were still high after the inflationary 1970s. Of course, the numbers don’t show the burden of interest payments from Government Sponsored Enterprises like Fannie Mae and Freddie Mac.

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