The U.S. economy is grappling with two troubling realities: the national debt is quickly nearing an unprecedented $40 trillion, and the average home price exceeds $400,000. (As of publication, the debt stands at $38.87 trillion.) Leading economists—including Moody’s chief economist Mark Zandi—note that the economy’s growth is driven almost entirely by high-income consumer spending and massive data center investments from big tech’s “hyperscalers.” Most Americans, meanwhile, are on the sidelines and effectively in a recession. But what if the national debt were a cost every American could directly feel?
A new report from the Yale Budget Lab (a policy research center) finds the national debt is indeed raising everyday costs for U.S. households. The analysis shows federal fiscal choices—specifically the debt added by laws passed since 2015, from the 2017 Tax Cuts and Jobs Act to pandemic relief measures—have sharply increased the price of major family purchases. It calculates the exact extra cost borrowers have paid due to post-2015 debt growth, relative to a scenario where those spending and tax changes never occurred.
With household borrowing costs up since 2015, the average new homebuyer with a 30-year mortgage will pay an additional $76,014 total—roughly $2,534 per year.
“Decades of consistent deficit spending in the U.S. have pushed up costs for families,” the researchers stated.
Life is becoming less affordable, particularly for young Americans. The average first-time homebuyer age reached 40 in 2025—sharply different from just 10 years prior, when people could afford 30-year mortgages in their early 30s. Gen Z also faces greater difficulty securing jobs as entry-level positions dwindle. The national debt, at minimum, isn’t improving this situation.
A new era of deficit spending
To be clear, deficit spending has justifications that many found worthwhile, depending on policy views. The Committee for a Responsible Federal Budget labels former President Trump’s unfunded tax cuts an economic “sugar high,” but most economists see them as a pro-growth, supply-side policy in the vein of Ronald Reagan. Other deficit measures launched during Trump’s first term—with strong support from then-Democratic House Speaker Nancy Pelosi—served as a real-world test of Modern Monetary Theory principles ahead of the pandemic: a quasi-universal basic income (via expanded unemployment benefits and multiple stimulus checks) to avoid economic collapse.
Trump’s tax cuts helped drive some of the largest deficit spending in U.S. history. The 2017 Tax Cuts and Jobs Act—extended in 2025 via the One Big Beautiful Bill Act—has added trillions to the national debt, with the Congressional Budget Office projecting an extra $3.4 trillion over the next eight years.
The national debt also grew in part due to COVID-era and post-pandemic government spending, marking an era of unusually high fiscal outlays. When businesses closed and economic activity slowed, the federal government deployed large-scale spending measures—including stimulus checks that mirrored universal basic income—to prevent a deeper global meltdown. Most of this spending worked: it spurred the fastest recovery after a market crash in recent history (at least the past 40 years). Employment rebounded in record time, returning to pre-pandemic levels by June 2022.
These measures had merit for many, depending on one’s view, but the Yale Budget Lab emphasizes a timeless economic truth: there’s no free lunch.
The hidden everyday costs of the national debt
The report uses two key assumptions: a one-to-one pass-through (30-year mortgage rates rise in lockstep with long-term Treasury yields) and an economic rule where each 1% increase in national debt lifts interest rates by 0.02%. Since 2015, new laws have increased projected debt by 49%, leading to a nearly 1% interest rate hike on the median home price (roughly $426,000 in Q3 2025, the study’s baseline).
“You could view this as essentially a major tax on mortgages,” said Benn Steil—director of international economics at the Council on Foreign Relations and author of research on the national debt’s unsustainable path—speaking to .
The report also outlines alternative scenarios for new homebuyers based on how sensitive interest rates are to federal debt. Even if rates are less responsive, homeowners would still pay $57,347 extra (about $1,912 per year) compared to a scenario without post-2015 debt growth. If rates are more responsive, that figure jumps to $112,640 total ($3,755 annually).
The debt’s impact extends beyond mortgages. For a 5.75-year auto loan, the cumulative lifetime cost is roughly $670—equivalent to an extra month of the average car payment. That’s $120 more per year than in a scenario without post-2015 debt growth. Small business owners are also affected: a 10-year small business loan would cost an estimated $7,723 extra over its lifetime ($770 more per year).
These costs are climbing because higher national debt leads the federal government to increase borrowing costs, which in turn raises prices for consumers. “You’re competing with the federal government for the bank’s available loan funds,” Steil explained. “The more money the government needs to borrow, the more you’ll pay when you want to finance a mortgage.”
This nearly 1-percentage-point rise in Treasury rates hits the housing market especially hard. “People usually link affordability to gas station prices or grocery store egg costs,” Steil noted. “But they rarely consider why their mortgage rate is 7% instead of 6%.”
He added: “This is extremely important for most families’ finances—recognizing your mortgage is far more costly than it would be if the government had been more fiscally responsible.”