Published On 20/9/2025
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Last updated: 12:35 (Mecca time)
Despite the uproar caused by the US Federal Reserve’s decision to reduce the basic interest rate by 0.25 percentage points to reach a range between 4% and 4.25%, this step, which the investors have long waited and welcomed the markets in the short term, does not carry magic solutions to the largest financial crisis facing the country in terms of public debt enlargement and the cost of its service.
The American government is spent today towards a trillion dollars annually on the benefits, which is equivalent to a dollar out of every $ 7 in the budget, a burden that exceeds the size of defensive spending for the first time in modern history, according to the Wall Street Journal.
Dollars ’interest burden
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The newspaper believes that the reduction of interest is rapidly reflected in the short -term cabinet bills that are directly affected by the federal decisions, but it does not change much of the image of public debt, as 80% of government bonds are issued for long periods between two years and 30 years, and with closed benefits since the date of its issuance.
Therefore, any concrete savings requires years of gradual re -financing, and Jessica Ridel, a researcher at the Manhattan Institute, explains: “Reducing this small size will not radically change the budget deficit that approaches a trillion dollars.”
Curved revenues more slope and inflationary risks
According to Wall Street Journal, long -term borrowing costs do not necessarily move with short interest rates, because investors put in their accounts the risks of inflation, federal independence and financial policies.
This often leads to a “more slope and” bonus “bonus high curve, which raises the cost of long -term borrowing.
“Investors are still asking for a sake when they loan us,” the report quotes Gard Bernstein, the former head of the Economic House of Economists at the White House, as saying.
The budget office in Congress also estimates that a slight increase does not exceed 0.1 percentage points in interest rates to add about 351 billion dollars of costs during one decade.
Treasury options and maneuvering boundaries
According to Wall Street Journal, one of the proposals to reduce the burden is to change the debt mixture by increasing dependence on short bills when their rates are low.
Stephen Mirn, chief economist of the Trump administration and member of the Federal Governor Council, had previously criticized the excessive excessive President Joe Biden administration to rely on short -term borrowing.
The newspaper notes that the United States missed a historical opportunity during the pandemic to re -financing its debts at low interest rates, as the average fell at that time to only 1.7%, before returning to exceed 3% in March 2025.
Trump pressure and federal independence
President Donald Trump has repeatedly linked between reducing interest and alleviating the burden of debt, noting the possibility of “providing 900 billion dollars annually” if the interest is reduced by 3 percentage points, equivalent to 12 times the last step.
But such estimates, according to Wall Street Journal, are “exaggerated” and do not reflect the reality of the American religion structure.
Robin Brooks, a researcher at the Brookings Institute, confirms that pressure on the federal to achieve political goals may lead to counterproductive, as it may raise inflation fears and lead to a long -term borrowing cost.
“The accumulated credibility of the independent central bank is what guarantees the costs of low borrowing in the long run.”
In conclusion, it appears that the recent interest reduction provides the government for some short -term borrowing, but it does not change the course of the interest bill that exceeded defensive spending, and does not dispel market fears of inflation and renew political pressure on the federal.
