Why a Small Interest Rate Hike Means a $50 Billion Hit to the Federal Budget
Dept. of Small Change

Why a Small Interest Rate Hike Means a $50 Billion Hit to the Federal Budget


If you think about it, the Federal Government has an adjustable rate mortgage on its nearly $20 trillion debt. That can result in a pretty dramatic wallop to the budget when the fed raises interest rates even a quarter of a percentage point. That would cost a cool $50 billion—more than the entire budget of the State Department, including foreign aid.

That may not seem like a lot to a government with an annual budget of $4 trillion, but here’s what it could mean to the current administration, which has an oversized spending goal as well as an oversized reduction in programs and services.

President Trump plans to boost spending on defense and border security while cutting taxes across the board. So where will the money come from? The following programs are on the president’s cut list, totaling $7.25 billion—not nearly enough to offset the cost of rising interest rates, let alone Trump’s new budget plan. 

ProgramBudget (millions of $)
Corporation for Public Broadcasting 445
National Endowment for the Arts 150
National Endowment for the Humanities 150
Minority Business Development Agency 36
Economic Development Administration 215
International Trade Administration 521
Manufacturing Extension Partnership 142
Office of Community Oriented Policing Services 286
Office of Violence Against Women 480
Legal Servies Corporation 503
Civil Rights Division of the Justice Department 156
Environment and Natural Resources Division of the Justice Department 123
UN Intergovernmental Panel on Climate Change 10
Office of Electricity Deliverability and Energy Reliability 262
Office of Energy Efficiency and Renewable Energy 2900
Office of Fossil Energy 878