Congressional spending choices since 2015 have pushed long-term Treasury yields nearly a full percentage point higher, and that rise is already showing up in everyday borrowing costs for American families.
The United States now owes $31.6 trillion to public creditors — more than $290,000 for each household — and the extra supply of government debt has crowded other borrowers into higher-rate territory. Budget Lab’s calculations trace almost a full percentage-point rise in long-term yields to those spending decisions; for many households, that has measurable consequences.
For a household taking out a 30-year mortgage at last year’s median home price, the higher long-term rate translates to roughly $2,500 more in payments each year and about $76,000 extra over the life of the loan. Smaller, everyday loans feel the same pressure: annual costs on a typical auto loan are up roughly $120 compared with a world in which those fiscal changes did not occur, and a typical small-business loan now costs about $770 more per year under the same comparison. Credit-card borrowing rates are hovering near record highs, amplifying the squeeze for people who rely on cards for short-term credit.
“A spendthrift government is raising borrowing costs for everyone,” Jared Bernstein said, summing up the link between higher deficits and pricier loans.
The mechanism is straightforward: when the federal government increases borrowing, it adds to the pool of securities competing for investors’ money. That competition lifts yields on Treasuries, and many consumer rates — mortgages, auto loans, small-business credit and other long-term borrowing — move with those yields. The contrast with past fiscal policy is notable. In the 1990s, coordinated deficit reduction through spending cuts and revenue increases lowered borrowing costs for families by about 0.6 percentage points, Budget Lab estimates.
Not all recent policy has pushed deficits in the same direction. The Fiscal Responsibility Act of 2023 reduced outlays and reclaimed unspent coronavirus relief funds, narrowing what the federal government needed to borrow. But major measures over the past decade — including a large tax overhaul, pandemic stimulus bills and additional legislation that expanded deficits — have, taken together, grown the government’s borrowing needs.
The practical upshot: higher Treasury yields have converted federal fiscal choices into ordinary household bills. For prospective homebuyers, the $2,500-a-year increase is immediate and concrete; for small businesses, $770 a year can mean delayed equipment purchases or tighter hiring plans. Lenders set many consumer rates with an eye on Treasuries, so the cost pressures filter across the credit market rather than staying confined to one sector.
Yet there is a political dissonance. Affordability has become a central slogan for lawmakers, but few of the proposals being debated would match the kind of spending reductions or revenue increases that Budget Lab’s numbers imply would be needed to push yields meaningfully lower. That gap — between political rhetoric and the fiscal choices that affect interest rates — is now part of the policy debate.
The most consequential unanswered question is quantification: how much of the recent rise in household borrowing costs stems specifically from federal deficits, and how much reflects other drivers of rates such as central-bank policy, inflation expectations or global capital flows? The available calculations make a strong case that deficits contributed substantially, but they stop short of isolating a single causal share. Without a clear deficit-reduction package on the table, those higher borrowing costs look set to persist, leaving households and small businesses to absorb the price of past fiscal choices.
