The Pat Kenny Show<\/a>, Brad Sester, Senior Fellow at the Council on Foreign Relations, shared how he believes trying to reduce the debt is an “unrealistic” goal, and trying to make sure it doesn’t get worse is more important.<\/p>\nWhen asked by Mr Kenny if it is possible for any administration to actually tackle the overall national debt, he explained: “Getting the debt down is probably an\u00a0unrealistic goal. Keeping the debt from rising relative to our economy is an important goal.<\/p>\n
“[The debt] is rising. Interest rates are rising. We suffered from a weak recovery from the global financial crisis, from the European financial\u00a0crisis, but one of the side effects was a long period of low interest rates. That long period of low interest rates is over.<\/p>\n
“That means the cost of servicing a big stock of debt is going up.\u00a0It’s several percentage points of US GDP and for a country that doesn’t collect much tax, that’s putting a lot of pressure on the rest of the budget if we weren’t just\u00a0borrowing it.<\/p>\n
“And it’s also making it harder for the US to finance the buildout of all the data centres because they’re (the hyperscalers, the Googles, the Amazons) now competing with the federal government for long term financing.”<\/p>\n
However, while these companies are supportive of datacentres and AI, they’re in competition for borrowing, which is a strange situation to be in.<\/p>\n
Mr Setser referred to it as a “paradox” and shared that while the government and large companies are trying to borrow “long-term funds”, which usually would give better rates, but if you borrow short-term, you’re at the mercy of the markets.<\/p>\n
Secretary Besant is trying to take some of the pressure off the\u00a0US bond market by shortening the time period which the US government borrows, leaving a bit more space for hyperscalers to borrow.<\/p>\n
“When interest rates change, your interest cost moves real fast. So that, to me, is the\u00a0biggest risk associated with this level of debt,” he concluded.<\/p>\n
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