U.S. Rep. Jodey Arrington, R-Texas, chairman of the House Budget Committee, blamed former President Joe Biden’s administration for a bleak milestone last year when the U.S. spent more on interest costs than it did on defense.

“Interest spending nearly tripled during Mr. Biden’s term. This is a disastrous result of his reckless spending spree, which ballooned the debt, triggered rampant inflation and increased borrowing costs for consumers and businesses,” Arrington wrote in an op-ed published by the Wall Street Journal. “As Republicans prepare to turn the page and execute President Trump’s America-first agenda, surging interest costs represent a ticking time bomb that must be defused.”

Carrying debt will only increase costs for U.S. taxpayers going forward, Arrington said.

“A major culprit is America’s untenable long-term debt,” he said. “As the debt grows, Washington must borrow more money to finance it. Investors, looking to mitigate risk amid such profligate federal spending, demand higher returns on U.S. Treasurys. This leads to compounding interest payments and even more borrowing and debt.”

U.S. interest spending is expected to increase in the coming years. In March 2024, the Congressional Budget Office projected “interest costs more than double in relation to GDP between 2024 and 2054, driven by rising interest rates and growing debt.”

The CBO’s most recent report estimated that public debt will rise from nearly $29 trillion to $52 trillion by 2035. That 2035 estimate is about 118% of U.S. gross domestic product, a measure of economic output. By 2029, debt as percentage of GDP will exceed the prior record set just after World War II in 1946.

Arrington noted that in 2024 “net interest costs accounted for 18% of federal revenue, and nearly half of every dollar we borrowed went to finance the debt.”

“This trend is continuing: By 2035 interest payments will suck up almost a quarter of federal revenues, and about two-thirds of every dollar borrowed will go to finance the debt,” he wrote. “Left unchecked, these payments are on track to become the single largest item in the federal budget by 2051, crowding out private investment and national priorities like infrastructure and national defense.

“True fiscal discipline is the only path forward,” he added.

Arrington said that’s exactly what President Donald Trump brings to the White House.

“Under his leadership, by cutting spending and controlling the national debt, the U.S. can launch an era of unparalleled strength and prosperity,” Arrington wrote.

During the 2024 campaign, the Tax Foundation said Trump’s policies could lead to more debt.

“Overall, Trump’s policies would reduce distortions in one part of the tax system, namely income taxes, only to replace them with new distortions in another part of the tax system, namely tariffs,” according to the Tax Foundation analysis. “The combination of policies under consideration risks shrinking the economy and growing the debt.”

The Committee for A Responsible Federal Budget projected Trump’s campaign promises could increase the debt by $7.50 trillion through 2035.

Trump has promised a more efficient government with his Department of Government Efficiency, led by Tesla CEO Elon Musk. Trump used his inauguration to underscore his plans to move away from taxing Americans in favor of tariffs on imports from other countries.

“I will immediately begin the overhaul of our trade system to protect American workers and families,” the 47th president said during his speech. “Instead of taxing our citizens to enrich other countries, we will tariff and tax foreign countries to enrich our citizens.”

Trump promised to cut “hundreds of billions” in federal spending this year.

Consumer confidence is up. The stock market, crypto, and gold numbers have looked solid after the initial post-election shock to the system. Things are looking good, but that doesn’t mean we can become complacent. It still behooves Americans to be frugal with spending until all of the dust settles and President Trump’s economic plan can truly kick into action. With that said, here’s some important information from Zero Hedge…

(Zero Hedge)—The Fed’s favorite (when it’s going down) inflation indicator – Core PCE – ticked up noticeably in October to +2.8%, the highest since April…

Headline PCE rose 0.2% MoM (as expected) lifting it 2.3% YoY (up from +2.1% YoY prior)…

A jump in Services and Durable Goods costs drove the reignition of inflation…

The so-called SuperCore PCE (Services ex-shelter) surged up to +3.51% YoY…

Incomes – for once – grew at a faster rate than spending (+0.6% MoM vs +0.4% MoM respectively)….

…and while that bumped up the savings rate MoM, thanks to massive revisions, Americans lost $140BN in personal savings… out of nowhere…

Oh look, the savings rate was just revised sharply lower for most of 2024 and some $140BN in personal savings was magically erased. pic.twitter.com/T3lGgLCIEQ

— zerohedge (@zerohedge) November 27, 2024

Remember when they revised it from 2.4% to 5.0% in late September to bump up GDP? Well, we guess Kamala isn’t president.. so all bets (adjustments) are off…

And finally, imagine how bad things would be if the government wasn’t handing over billions to ‘we, the people’ all of a sudden…

Bye, bye, rate-cut expectations!…

At that meeting, FOMC members overwhelmingly voted to lower the federal funds rate by 25 basis points, to a new range of 4.5–4.75 percent, signaling further loosening of restrictive monetary policy.

The meeting summary indicated that officials are confident that inflation is moving sustainably toward the institution’s objective of 2 percent. The Fed could rapidly ease policy if there were sudden weakness in the labor market or the broader economy, the document said.

“In discussing the outlook for monetary policy, participants anticipated that if the data came in about as expected, with inflation continuing to move down sustainably to 2 percent and the economy remaining near maximum employment, it would likely be appropriate to move gradually toward a more neutral stance of policy over time,” the minutes stated.

Meeting participants did express uncertainty regarding how low interest rates need to be before touching the neutral rate that neither stimulates economic activity nor halts growth.

“Many participants observed that uncertainties concerning the level of the neutral rate of interest complicated the assessment of the degree of restrictiveness of monetary policy and, in their view, made it appropriate to reduce policy restraint gradually,” the minutes said.

Looking ahead, Fed policymakers said that incoming data are consistent with the central bank’s 2 percent inflation target. They noted that higher shelter costs bolstered recent higher readings.

“Participants cited various factors likely to put continuing downward pressure on inflation, including waning business pricing power, the committee’s still-restrictive monetary policy stance, and well-anchored longer-term inflation expectations,” it added.

Fed Chair Jerome Powell told reporters at the post-meeting press conference earlier this month that the road to 2 percent inflation may be “bumpy” with more bumps in the road.

As for the U.S. economic landscape, participants concluded that downside risks to the labor market and wider economy decreased.

In addition, staff projected that economic conditions would remain solid and growth projections would be higher than in the previous assessment.

Tim Barkin, president of the Federal Reserve Bank of Richmond, recently expressed caution over the labor market but was optimistic about inflation.

“The labor market might be fine, or it might continue to weaken,” Barkin said in prepared remarks to the Baltimore Together Summit on Nov. 12.

“Inflation might be coming under control, or the level of core might give a signal that it risks getting stuck above target.”

Market Reaction

Financial markets registered tepid gains toward the closing bell on Nov. 26, with the leading benchmark indexes up by as much as 0.4 percent.

Yields in the U.S. Treasury market attempted to reverse the previous session’s sharp decline. The benchmark 10-year yield topped 4.3 percent. The two-year yield was flat at 2.5 percent, while the 30-year bond surged to 4.48 percent.

The greenback extended its gains. The U.S. dollar index, a gauge of the greenback against a basket of currencies, recorded a modest increase and added to its year-to-date rally of 5.6 percent.

Policy minutes did little to change the market’s assessment of next month’s outcome.

“The minutes did nothing to alter my view that the policy rate is going to be adjusted lower next week and will continue to do so through the next calendar year,” Jamie Cox, managing partner for the Harris Financial Group, said in a note emailed to The Epoch Times.

According to the CME FedWatch Tool, investors are mostly penciling in a quarter-point rate cut.

The rate-cutting cycle will persist throughout 2025, though Fed easing might not be as aggressive, says Jeffrey Roach, the chief economist at LPL Financial.

“In our view, after weeks of markets pricing in too many rate cuts throughout 2025, Fed rate cut pricing is now better aligned with economic data,” Roach said in a note emailed to The Epoch Times. “Currently, markets still expect the Fed to cut rates below 4 percent by the end of 2025.”

The FOMC will hold its next two-day policy meeting on Dec. 16–17.