National Debt & Deficit: How It Affects You
- A Republican-backed tax cut package, already passed by the House, is facing scrutiny in the Senate due to concerns about its potential impact on the national debt.
- The Committee for a responsible Federal Budget estimates the bill could add $3.1 trillion to the debt over the next decade,while the Penn Wharton Budget Model projects an...
- The legislation arrives as interest payments on the national debt surpass defense spending, becoming the second-largest federal outlay after Social Security.
Proposed GOP tax cuts, already passed by the House, could dramatically increase the U.S. national debt, possibly leading to higher interest rates on mortgages, auto loans, and other consumer borrowing. Economists warn that the bill, projected to add trillions to the debt, could considerably impact household finances by increasing the cost of borrowing. The legislation comes as interest payments on the debt surpass defense spending, a critical indicator of the nation’s fiscal health. Experts, including Mark Zandi from Moody’s, caution the rising debt may translate to higher costs for people and businesses. News Directory 3 is closely watching the unfolding situation.Discover what’s next for the Senate’s consideration of the bill and its impact on your wallet.
GOP Tax Cuts: How Rising U.S. Debt Could Impact Consumer Finances
Updated June 02, 2025
A Republican-backed tax cut package, already passed by the House, is facing scrutiny in the Senate due to concerns about its potential impact on the national debt. Economists warn that the proposed tax cuts could substantially increase the U.S. debt, leading to higher interest rates for consumers and potentially impacting household finances.
The Committee for a responsible Federal Budget estimates the bill could add $3.1 trillion to the debt over the next decade,while the Penn Wharton Budget Model projects an even higher figure of $3.8 trillion. Rep. Thomas Massie, R-Ky., opposed the bill, labeling it a “debt bomb ticking.”
The legislation arrives as interest payments on the national debt surpass defense spending, becoming the second-largest federal outlay after Social Security. The federal debt, as a percentage of GDP, is already at a record high.
Mark Zandi, chief economist at Moody’s, suggests a higher U.S. debt burden would likely translate to increased costs for consumer loans. He said the rising debt load means higher interest rates for consumers, businesspeople, and investors.
The House bill proposes approximately $4 trillion in tax cuts, largely benefiting wealthy households, while also cutting spending on safety-net programs. Some Republicans argue that President Trump’s tariff policies could offset the tax cuts, but economists consider tariffs an unreliable revenue source.
Treasury yields, wich influence consumer borrowing rates, are closely tied to perceptions of U.S. debt. Mortgages and auto loans are frequently enough priced based on the 10-year Treasury yield. Philip Chao, chief investment officer at Experiential Wealth, said interest rates priced to the 10-year Treasury also have to go up because of the higher risk being taken.
Congress can do funny math — fantasy math — if it wants. But bond investors don’t.
how Debt May Impact Consumer borrowing
Zandi estimates that for every 1-point increase in the debt-to-GDP ratio, the 10-year Treasury yield rises by about 0.02 percentage points. He said a rise from the current 100% to 130% would push the 10-year Treasury yield above 5%. This increase would likely raise fixed 30-year mortgage rates, potentially making homeownership less accessible.
Kent Smetters, an economist with the Penn Wharton Budget Model, projects the debt-to-GDP ratio could climb from 101% in 2025 to 148% by 2034 under the House legislation.
What’s next
The Senate will now consider the House bill, with potential revisions expected due to concerns about the rising national debt and its impact on consumers.economists continue to monitor the situation, emphasizing the importance of addressing the growing debt burden to mitigate potential financial consequences for individuals and the broader economy.