Steven Kopitz wrote:
On the other hand, interest payments as a share of GDP have increased from 9.5% in 2020 to 13.6% in 2023. The increase in interest payments alone accounts for 4% of GDP. Additionally, interest payments will continue to rise as existing debt is reduced and must be refinanced, and will fall with considerable delay even if inflation and interest rates return to lower levels.
I don't understand how these numbers are calculated. This must be the “new math” they teach in schools now.
I download FRED series A091RC1Q027SBEAdivided by the FRED series gross domestic productdivide the first by the second, and multiply by 100 to get:
figure 1: Federal interest payments divided by GDP, expressed as a percentage (blue). NBER-defined recession peak-to-trough dates are in gray. Treasury, BEA via FRED, NBER, and author's calculations.
I don't see 13.6% in these calculations. If someone accidentally multiplied the federal interest payment annual rate for fiscal year 2023 by 4 and then divided it by the GDP annual rate for fiscal year 2023, I would indeed get 13.3%. But this calculation is meaningless.
