Sacks @ 00:59:06Wrong
economygovernment
If U.S. interest rates remain around 3% on the 10‑year Treasury, the federal government will incur on the order of $1 trillion per year in debt service, and the U.S. will be in a prolonged era of fiscal austerity that will last beyond 2022 and extend past the current (Biden) presidential term ending January 2025.
If interest rates stay at this. Call it 3% level, which is roughly where the ten year T-bills been. You know, bouncing around at that is a lot of debt service, $1 trillion a year of debt service. So I think we're probably entering an era, an overall era of austerity that lasts more than just this year or even this presidency.View on YouTube
Explanation
Two key parts of Sacks’s prediction can be checked: (1) interest rates and debt‑service costs; and (2) whether the U.S. actually entered a multi‑year period of fiscal austerity extending through and beyond the Biden term (to January 2025).
- Interest rates and $1T/year in debt service
- The 10‑year Treasury yield was around 3% in mid‑2022, but then rose and stayed mostly in the 3.5–4.5%+ range from late 2022 through 2025, not “around 3%.” Federal Reserve data (series GS10) show monthly averages rising from 2.90% in July–August 2022 to ~4% by late 2022 and roughly 3.5–4.8% during 2023–25.(fred.stlouisfed.org)
- Net interest outlays on the federal debt were $475B in FY 2022, jumped to $659B in FY 2023, and then to about $880B in FY 2024.(crfb.org) CBO’s 2025 budget review indicates net interest surpassed $1T for the first time in FY 2025, in line with projections that interest costs would reach roughly $900B in 2024 and exceed $1T by the mid‑2020s.(congress.gov) So “on the order of $1 trillion per year” did become true by 2025, though at higher rates than his 3% assumption and after a ramp‑up rather than immediately.
- Did the U.S. enter a prolonged era of fiscal austerity through and beyond the Biden term?
- Fiscal austerity would normally mean sustained cuts in real spending and/or sharply reduced deficits. In reality, federal outlays rose: Treasury data show total outlays growing from $6.14T in FY 2023 to $6.75–6.94T in FY 2024 (depending on the adjustment), with outlays increasing about 10% year‑over‑year and rising from 22.5% to 23.4% of GDP.(home.treasury.gov) CBO and Treasury figures for 2023–24 show deficits of roughly $1.7T–$1.8T per year, historically large for a period of solid growth and low unemployment.(fiscal.treasury.gov)
- The Fiscal Responsibility Act of 2023 did impose caps on discretionary spending in FY 2024 and 2025 and is estimated to reduce non‑interest outlays by about $1.3T over ten years, mostly via slower growth in discretionary spending.(budgetmodel.wharton.upenn.edu) But this is modest restraint against a high baseline, not a sweeping austerity program; overall spending and deficits continued to rise.
- At the same time, major initiatives such as the Inflation Reduction Act and expanded clean‑energy tax credits added hundreds of billions in new spending and tax subsidies over a decade, which is inconsistent with a broad, long‑lasting austerity regime.(crfb.org)
Bottom line: Sacks was directionally right that higher rates would drive net interest costs toward $1T/year by the mid‑2020s, but his core claim—that this would push the U.S. into a prolonged era of fiscal austerity lasting beyond 2022 and through the Biden presidency—has not materialized. Federal spending and deficits have remained high and growing, with only limited discretionary caps rather than deep, sustained cuts. Overall, the prediction is wrong.