Wild Card In The Budget

It has hardly been mentioned in the current U.S. federal budget debate, but economist William V. Sullivan Jr. of Dean Witter Reynolds Inc. thinks the estimated $27 billion rise in interest expenses in the fiscal year just ended deserves more attention. In the three prior fiscal years, falling interest rates held down interest outlays despite a $1 trillion rise in the gross federal debt. But the party ended in early 1994 when the Federal Reserve decided to reverse course and push up interest rates, thus raising the Treasury's debt servicing costs.

To continue reading this article you must be a Bloomberg Professional Service Subscriber.