And it continues to grow; the United States is running large deficits (5% of GDP) during a period of low unemployment for the first time since the Vietnam War. In other words, we now have significant structural government budget deficits rather than just temporary cyclical/recession deficits:

Governments cannot run deficits in excess of the growth in GDP without eventual consequences. As we will see in the chapter covering the research of Rogoff and Reinhart, things go along well until Bang! bond investors lose confidence in the ability of a government to pay its debt, even if that debt is denominated in a currency the government can pr

If it is the wealth effect, and not the consumption-postponement effect, that really drives changes in savings and consumption rates, then raising rates would reduce consumption only if there was a negative correlation between interest rates and wealth. There clearly is in the United States, where most household wealth consists of real estate and s