Long-term interest rates have been rising steadily over the past six months and have now reached their highest levels since before the Great Recession of 2008. These higher rates, combined with inflation that remains above the Federal Reserve’s 2% target, are likely driven in part by unsustainably high federal budget deficits.

In an upcoming series of blog posts, I will examine some of the economics of debt, deficits, and today’s high interest rates—and close with how policymakers should respond. The posts will examine the following questions, sketched out briefly below:

How do we know when deficits are too high—or too low?

Today’s deficits are too high, but the same size of deficit (or an even larger one) might be fine and useful in times when the economy is weak and needs stimulus. But unemployment is just over 4%, the economy does not need significant fiscal stimulus, and interest rates are rising. These are all good signals that too high deficits are contributing to higher interest rates and pressuring the economy.

What’s the best way to measure the pressure that excessive deficits and debt are putting on the U.S. economy?

The best measure is the real debt service ratio—inflation-adjusted interest payments as a share of GDP.

Is the rise of interest rates in 2026 just chickens coming home to roost from decades of too high deficits and debt?

Deficits in the 2010s and early 2020s were either a function of or a useful response to economic conditions of the time. Today’s problems would be just as bad had we run more austere fiscal policy in those years.

How do too high structural budget deficits harm typical families?

The harm almost always comes gradually. Too high structural deficits reduce capital investment and lead to slower productivity growth. A crisis driven simply by the economics of U.S. debt is extremely unlikely. A crisis driven by deranged political choices and dysfunction that intersect with U.S. debt is sadly imaginable.

What’s the optimal policy response to today’s too high structural deficits?

Raising revenue significantly from the richest households and corporations is the best path forward.

Does today’s too high structural deficit significantly constrain policymakers from doing the right things if the economy enters recession?

Putting measures in place to solve the structural deficit should not preclude policymakers from responding to the next recession with fiscal relief that temporarily boosts deficits.