The high stakes standoff between Fed Chair Jerome Powell and President Donald Trump is exhilarating.

Trump wants Powell to cut interest rates so the U.S. government can save money on its debt financing costs. Powell wants to wait and see how tariff policies impact consumer prices before cutting – or raising – rates.

Between July and September, the U.S. Treasury intends to borrow over $1 trillion in privately-held net marketable debt. Between October and December, the Treasury plans to borrow another $590 billion. Lower interest rates would certainly help Uncle Sam finance all this new debt. But it may also bring unpleasant consequences.

Lower interest rates, for example, encourage more borrowing. With a national debt of $37 trillion, which is projected to skyrocket to $60 trillion or more well before the middle of the century, borrowing more money is the last thing the U.S. government should be doing.

If Congress really cared about the future of America, and the younger citizens whose futures are being crippled by all this debt, it would balance the budget or even run a surplus to pay down the debt. Instead, Congress is stepping on the gas as it speeds towards the fiscal cliff. Continue reading →